Countrywide borrows 11.5 Billion, may declare bankruptcy

[volinbham]

Countrywide just borrowed 11.5 billion from banks. The solvency of Banks in this country is Federally guaranteed.

I thought you were referring to Countrywide being federally insured.

As for the line of credit they accessed? I don't know the nature of those loans and how it would affect the federal insurance on individuals' deposits.

 

[CSpindizzy]

Traditional Loans are not the problem here, its the ARM's with the balloons attached. If most everyone would stay with a traditional loan instead of trying to bite off more than they could chew they would be ok. So if you have a choice in taking a loan (ONLY IF YOU ARE READY) take a traditional loan vs. these crappy ARM's that have balloons that will burst on you after 5 years. The only thing that will affect Country Wide is profitability because they don't make much on traditional loans. Country Wide is fine, they won't declare bankruptcy.

Whether it's ARM's or not, traditional loans are still suffering. Every mortgage company has tightened their standards. Bankruptcies have occurred even in the traditional loan markets. There are reports that CountryWide was supposed to buy up many of the loans of HomeBanc before they declared bankruptcy. This could be why CountryWide is taking a hit. Neither side is talking.

 

[KentheOrange]

Countrywide just borrowed 11.5 billion from banks. The solvency of Banks in this country is Federally guaranteed.

When did that start? Used to be that the FDIC insured up to $100,000 per account which includes individual and business accounts and only one account per entity although a maried couple could protect up to $300,000 with one joint and two individual accounts.

 

[VolunteerHillbilly]

Interesting legal question that I do not feel like researching is whether the companies that buy the debt from the bankrupt lenders are obligated to operate under the same contract terms as the original lender? Perhaps they can compel a refinance by calling the note due? Not my problem but something to think about.

 

[volinbham]

Interesting legal question that I do not feel like researching is whether the companies that buy the debt from the bankrupt lenders are obligated to operate under the same contract terms as the original lender? Perhaps they can compel a refinance by calling the note due? Not my problem but something to think about.

I don't know the answer to that but there is an industry segment that buys bad debt - presumably the difference between the price they pay and what they recover through aggressive tactics can be quite profitable.

 

[CSpindizzy]

Evidently people in CA are rushing to the CountryWide banks to withdraw money. The Feds have been eyeing this but so far have not been alarmed by what they've seen. Watching that cash be depleted from them.

 

[BigPapaVol]

Interesting legal question that I do not feel like researching is whether the companies that buy the debt from the bankrupt lenders are obligated to operate under the same contract terms as the original lender? Perhaps they can compel a refinance by calling the note due? Not my problem but something to think about.

anyone that buys the note or simply participates in the note must live by the contract as signed by the borrower. those terms are often how potential buyers put values on the different assets (loans) of a troubled financial institution.

 

[utvolpj]

Interesting legal question that I do not feel like researching is whether the companies that buy the debt from the bankrupt lenders are obligated to operate under the same contract terms as the original lender? Perhaps they can compel a refinance by calling the note due? Not my problem but something to think about.

There's a good answer here on that question

What if my mortgage lender goes broke? - Answer Desk - MSNBC.com

But it’s your solvency — not the lenders — that matter most to you. If you’re a good borrower, with a good credit and payment history, your mortgage is the most valuable asset a financially troubled lender has. In some ways, they need you more than you need them.
In any case, the terms of your original mortgage, like many such contracts, are almost always fixed and valid no matter who holds the loan. (If you want double check this and see what happens if your mortgage changes hands, dig out the original document and read the paragraphs on “sale or assignment” of your loan.)

 

[droski]

Evidently people in CA are rushing to the CountryWide banks to withdraw money. The Feds have been eyeing this but so far have not been alarmed by what they've seen. Watching that cash be depleted from them.

have they never heard of the FDIC?

 

[droski]

When did that start? Used to be that the FDIC insured up to $100,000 per account which includes individual and business accounts and only one account per entity although a maried couple could protect up to $300,000 with one joint and two individual accounts.

still true, but few people with that kind of cash lying around put it in a bank. it's the corporations that hold countrywide's loans that are in trouble, not the general population.

 

[KentheOrange]

still true, but few people with that kind of cash lying around put it in a bank. it's the corporations that hold countrywide's loans that are in trouble, not the general population.

Thanks, the point I was trying to make was that the Feds do not guarantee the solvency of banks, state or federal.

 

[SWIL]

I miss Greenspan...

 

[CSpindizzy]

So do quite a few investors...

 

[coffeevol]

Bank of America just pumped 2 BILLION dollars into countrywide stock because they know that this will correct itself and are confident in this investment. By doing so they are also trying to relay to public that they still have confidence in the nations largest lender. I am a realtor and from what I understand it is all the creative mortgages that got them into this situation and they have tightened borrowing requirements so that you can not get into a home and leave with extra money at closing. The programs that hurt them were the; 80/20's, interest only, prime ARM's and all that creative crap. It may be a rough road ahead but according to all the experts (not myself) by spring/summer '08 this should level out and bring the market back to "normal" conditions.