posted by admin on May 25

CALABASAS, Calif. (AP) — The chairman of beleaguered Countrywide Financial Corp. raised eyebrows and tempers with his snippy reply to an e-mail plea from a man who said he was in danger of losing his home.

“Disgusting,” Angelo Mozilo wrote in his inadvertent reply to an e-mail from Daniel Bailey Jr. who had asked the company to modify terms of his adjustable-rate mortgage. Bailey said he didn’t fully understand the terms, was wrongly told he could refinance after a year and was on the verge of losing his home of 16 years because of unaffordable payments. Bailey’s e-mail went to 20 Countrywide addresses. He used language from a form letter on the Web site LoanSafe.org, which offers advice to borrowers in trouble. Countrywide said mass e-mails have flooded its inboxes and disrupted operations. “This is unbelievable,” Mozilo wrote Tuesday. “Most of these letters now have the same wording. Obviously they are being counseled by some other person or by the Internet. Disgusting.” Mozilo apparently clicked “reply” instead of “forward,” sending his comments back to Bailey. Bailey posted the response on a LoanSafe forum, touching off a furor on housing Web sites. A comment posted on loanworkout.org said Mozilo’s e-mail was “a perfect example of the ‘help’ they can expect to receive when contacting their lenders.” Another comment on the Web site read: “If borrowers want the freedom to take out credit for hundreds of thousands of dollars, they are equally responsible to not sign something they don’t understand.” Late Tuesday, Countrywide issued a statement saying the company and Mozilo “regret any misunderstanding caused by his inadvertent response to an e-mail by Mr. Bailey. Countrywide is actively working to help borrowers like Mr. Bailey keep their homes.” Last week, a federal judge ruled that a shareholder lawsuit against Mozilo and other Countrywide executives and directors should go to trial. The plaintiffs claim the top officials failed to provide enough oversight of the lender and misled shareholders about the company’s true financial state. According to congressional figures, Countrywide lost $1.2 billion in the third quarter of 2007 and another $422 million in the fourth quarter as the subprime mortgage crisis hit. The company’s stock fell 80 percent between February and the end of the year. During the same period, Mozilo received a $1.9 million salary. He also received $20 million in performance-based stock awards and sold $121 million in stock.

posted by admin on May 20

The Senate Banking Committee has approved a housing bill by a 19-2 vote that strengthens regulation of Fannie Mae, Freddie Mac, and the Federal Home Loan Banks and authorizes the Federal Housing Administration to refinance struggling homeowners with “underwater” mortgages.

Banking Committee Chairman Christopher J. Dodd, D-Conn., said the bill addresses foreclosure prevention, provides a strong regulator for the government-sponsored enterprises, and creates an affordable housing trust funded by Fannie and Freddie. Sen. Dodd said it is “a good bill and a balanced bill” that resulted from weeks of negotiations with Sen. Richard C. Shelby, R-Ala. “In my judgment, this legislation creates a regulator that has the authority and flexibility to regulate the GSEs appropriately,” Sen. Shelby said at the committee mark-up session.

The Alabama senator said he is pleased that the cost of the FHA refinancing will be borne by an affordable housing fund and not taxpayers. “I believe we should do all we can to help struggling homeowners, short of asking the taxpayers to foot the bill,” he said. Sen. Charles E. Schumer, D-N.Y., raised concerns about the jumbo loan provision, which raises the conforming limit in high-cost areas to $550,000. “I want to have it higher,” he said. He also objected to barring Fannie and Freddie from holding these higher-balance loans in portfolio because there is no market for securitized jumbos, and it will effectively block the GSEs from buying jumbos from lenders. The House GSE bill allows the new regulator to decide whether Fannie and Freddie should securitize jumbos or hold them in portfolio.

posted by admin on May 13

By ELLEN SIMON, AP Business WriterTue May 13, 12:06 AM ET

The economic downturn is hitting roughly one in 10 middle-aged and older Americans especially hard, compelling them to borrow money for everyday living expenses and to seek help from family, friends or charities, according to a survey released Tuesday by the AARP.

In the telephone survey of 1,002 adults 45 and older, nearly four in 10 said they had helped a child pay bills or expenses. Among retirees, one-third said they’d helped their children pay bills. Eight percent said they’d helped a parent pay bills or expenses. The survey’s margin of sampling error was plus or minus 3 percentage points.

One-third of survey participants said they stopped putting money into their 401(k) or retirement account and 14 percent said they had cut back on their medications.

“We have patients coming in fewer times,” said registered nurse Tucky Franz of Salisbury, Md. “They’ll cut back because of the copay.”

The majority of baby boomers said they were finding it more difficult to pay for essentials and utilities, and six in 10 said they had cut back on eating out and entertainment.

James Dyas, 75, of Sherman, Conn., said he and his wife go to their favorite Mexican restaurant about half as frequently as they used to. “About all the money we have goes to buying gasoline,” he said.

While the survey doesn’t show large numbers of people making radical changes — taking second jobs or moving to a smaller home — it did find that more than one-quarter of those surveyed are having trouble paying their mortgage or rent.

Compared with older people, a greater percentage of younger baby boomers, those 45 to 54, said they were cutting back on medications, prematurely withdrawing retirement funds and postponing paying bills.

“For the younger boomers, it’s been an especially rude wake-up call,” said Jim Dau, a spokesman for the AARP, a nonprofit that advocates Americans 50 and older.

Debra Koziol, a 48-year-old hospital finance worker in Rhode Island, said she’s started carpooling to work with her sister a few times a week and packing lunch every day.

“The food is better,” she said. “Some of this is creating better habits, not so much waste.”

posted by admin on May 12

THE ONGOING MORTGAGE-DEFAULT TORNADO HIT FANNIE MAE with ferocity last week, when the mortgage giant reported a first-quarter loss of $2.2 billion, its third quarterly loss in a row.

Rising credit costs — industry lingo for foreclosure costs and reserves against future loan charge-offs — was the primary culprit. Nor did management sound many cheery notes in the news release or conference call afterwards. They boosted the expected range of home price declines for 2008, to 7% to 9% from 5% to 7%. Therefore mortgage defaults will be even higher next year.

The company also announced a 30% cut in the quarterly dividend to marshal capital and a plan to raise $6 billion in new common and preferred equity (some $4.5 billion in new issues were priced later in the week).

Fannie Mae’s shares (ticker: FNM) fell nearly 6% for the week, closing Friday at $27.81.

We had sounded a strikingly bearish note on Fannie in a cover story earlier this year (”Is Fannie Mae Toast?” March 10). We pointed out that Fannie, by virtue of its location in the heart of the home- mortgage-market collapse, was likely to face many quarters of crippling losses that would all but deplete its capital.

We surmised that the U.S. government might be forced to nationalize the company in order to fulfill its implicit guarantee of Fannie’s huge corporate and guaranteed debt obligations. The possibility of a bailout like that has recently been getting more attention from regulators and lawmakers, as the New York Times reported in a front-page story last week.

The latest earnings report did nothing to change our gloomy view. For example, in the first quarter Fannie was forced to torch its “fair value” net worth by $23.6 billion to a paltry $12.2 billion. After subtracting $14.3 billion in net worth attributable to Fannie’s preferred stock, that left common shareholders with negative equity of about $2 billion. That’s surely not much protection against future losses on Fannie’s $3-trillion credit book.

That net-worth hit occurred in an area that our story highlighted. By our reckoning, Fannie had badly overestimated the net value of its business of guaranteeing mortgage securities, in light of the heavy losses showing up there. Its accountants apparently agreed, to the tune of the $26 billion reduction in the value of the business that Fannie took in the first quarter.

In the March-quarter numbers, Fannie also mentioned some $9.1 billion in unrealized losses, some $8 billion of which it failed to run through its income statement on the grounds that they were merely temporary. These losses come from subprime and Alt-A (a notch above subprime) securities that are likely to prove anything but temporary.

FINALLY, SOME FUNKY ASSETS ON FANNIE’S balance sheet that we’d discussed in our original story have only grown since. To wit, Fannie in its latest numbers reported that deferred-tax assets had jumped from $13 billion to $17.8 billion in the quarter. Yet as losses continue, these tax offsets to future income will have to be written down sharply, thus crushing both Fannie’s future earnings and net worth.

Bulls on Fannie look to improved profits the company is realizing on newly booked business in both its guarantee business and investment portfolio. Likewise they are counting on government regulators to be lenient with the company because of its importance in providing liquidity to the ailing home-mortgage market. After all, Fannie was able to “grow” its way out of near oblivion after the savings and loan debacle in the 1980s.

Such a turnaround now would be far more difficult, given the virulence of the current credit cycle and housing-price crisis. As one report last week noted acidly, Fannie has become the lifeguard that can’t swim.

– Jonathan R. Laing