Smart Borrower Blog

Countrywide Financial and The HOPE Program

Sep 30th, 2007 @ 9:37 AM by Alden Smith

I read with a great deal of interest a report on Countrywide Financial Corp’s CEO, Angelo Mozilo, and his aggressive plan to sell stock options at a time when CFC is in dire straits. It seems he had changed his trading plans in Oct. 2006, when Mozilo adopted a stock trading plan that called for selling 350,000 shares a month. This plan was put into effect three days after Countrywide reported that its earnings from mortgage banking had fallen 40% in the third quarter ended Sept. 30. Although we are assured he did nothing wrong, it gives one pause to see that he has steadily increased his trading options since then so that he can now sell 580,000 shares each month. A real vote of confidence to his company, indeed.

Countrywide’s HOPE Program

The news today is of course full of gloom and doom in regards to the mortgage market. I don’t see this going away soon. In the course of research, I looked to Countrywide’s HOPE program. The headline that caught my eye was from the NY Times, begging the question “Can These Mortgages Be Saved?” The gist of the article explained Countrywide’s HOPE program, an acronym for “Helping homeowners, Offering solutions, Preventing foreclosures and Envisioning success,” which is supposed to work with people who face foreclosure. This is a 2,700-member unit. It focused on a woman in Somers Point, N.J. that was given foreclosure papers on Christmas Eve. Countrywide, which services her loan, had charged her escrow account for flood insurance she did not need and could not afford to pay. In trying to resolve this situation, she fell behind in payment. Countrywide says “it has worked extensively with her to rescue her loan from default but that its efforts have failed.” Further research shows that many interviewed for the article gave little good news about the HOPE program, stating that they encounter hostility and are charged large and unexplained fees throughout the foreclosure process – regardless of whether or not they end up keeping their homes.

Looking At Countrywide’s Data

Countrywide says it has saved 39,582 mortgages from foreclosure so far this year. Well and good. But looking at the numbers more closely shows us that Countrywide services almost nine million mortgages, with a value of $1.45 trillion. This figure of 39,582, which may seem large, shows that 39,582 loans amounts to just 8.8 percent of their business. These workouts showed that two types of deals were made – borrowers who agreed to sell their homes for less than their loan amounts, and homeowners turning over their deeds to Countrywide to prevent a foreclosure.

So Who’s Watching Countrywide?

Senator Charles E. Schumer, Democrat of New York and a member of the Senate Committee on Banking, Housing and Urban Affairs, states that “they are trying to get away with doing a good job here when you can prove by digging even a half an inch deeper that they’re not.” Countrywide of course disagrees. Steve Bailey, a Countrywide executive, said “Our No. 1 priority is to help borrowers stay in their homes.” Yet studies show that the workouts involved deferring overdue interest or adding the past due amount to a loan.

Countrywide is of course not the only company that people see as hard to work with. The biggest point of the whole situation with Countrywide is that they are the most aggressive lender in the market that sells adjustable rate mortgages. ARM’s are seen as the biggest downfall for many people who are in serious trouble due to foreclosure and inability to pay. Countrywide has made it clear to its investors that it is not in the business of reducing interest rates or providing workouts that reduce interest rates on loans. And I see this as “business as usual.” Countrywide has reported it is going to increase its HOPE program. Place of origin? India…

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