Countrywide And Foreclosures

February 18th, 2008

In January 2008 the foreclosure rates of Countrywide Financial Corporation made a double jump. It stated that the rates of its 9.02 million mortgages rose to 1.48% from 0.77% - that latter being the rate of the previous year.

Countrywide, based in Calabasas, is being taken over by Bank of America Corporation. It has is offices in Latham and Saratoga Springs. One of the largest banks in Albany, New York, is BofA. The take over will make Charlotte, NC based BofA the largest loan provider and servicer in the country.

The delinquency rate in January 2008 rose to 7.47% from 4.32% of January of the previous year. Last month Countrywide had sanctioned $21.9 billion in mortgages. It was less than $37.1 billion funded a year ago. The company stated that a third of its sub-prime mortgages were delinquent at the end of the previous year. In the fourth quarter of 2007 it lost $422 million.

Recently Countrywide announced plans to help foreclosure victims. Together with ACORN ( Association of Community Organizations for Reform Now) a programme is being launched to help those sitting in various states of foreclosure. This current plan is in addition to a previous one in which Countrywide sanctioned $16 billion for the same cause. The understanding between Countrywide and ACORN focuses on those borrowers who have been so far current but cannot keep pace with the rise in interest rates. More alternatives will be available to those lagging behind – short term repayment opportunities, loan modification to affordable levels, interest freeze or rolling back to previous rates and overall reduction in interest cum rates.

The Chief Executive of BofA reiterated that the activities of Countrywide were consistent with the bank’s due diligence and purchase price of $4 billion agreed-upon.

How far this will have tangible effects time alone can tell. Meanwhile the forward march of foreclosures across the country continues at rapid pace. It is the sub-prime mortgages with floating interest rates that are blamed squarely for the foreclosure tornado. The loans were taken by those with poor credit ratings who dreamt of owning houses lured on by teaser interest rates. Another group took loans for purposes of speculation cashing in on the housing boom. When the bubble burst they are now just walking away abandoning the properties. It is creating grave law and order problems, affecting economy and collection of revenue taxes. A global reaction has set in.