Mortgage Crisis Topples Countrywide

[Oct 5, 2007.]

 

Countrywide Financial Corporation has become the latest casualty of the national housing crisis.

Established in the late '60s, Countrywide has now had to embark on an aggressive plan just to survive. That's included massive layoffs, billions of dollars in borrowing, and a complete re-vamping of its loan procedures. In fact, subprime loans, which involve lending to individuals with troubled credit histories, have been all but eliminated.

Still, experts expect Countrywide will weather the storm, thanks to its strong retail banking component, along with its efforts to reduce risky lending practices. However, it might not fare as well as another lending giant, Wells Fargo.

The dismal state of the housing industry is not expected to end anytime soon. In fact, some experts predict that the housing crunch will continue for another year and a half.

Countrywide loans amounted to more than $460 billion last year. In fact, the lender was responsible for more than 13 percent of the loan market as of the end of June, as reported in the publication known as "Inside Mortgage Finance."

Analysts say that the mortgage market changed more quickly than Countrywide had expected, resulting in some unanticipated financial problems.

Critics say that the lender sacrificed long-term viability for the sake of short-run profits. The company's task now is to convince investors that the company is returning to a policy designed to safeguard the interests of consumers and shareholders alike.

Countrywide Chairman Angelo Mozilo has been quoted as saying that the lender was "well positioned and extremely optimistic about our prospects to continue generating growth and superior returns over future cycles."

However, the company's stock has declined a staggering 60%, leading to more uncertainty about the lender's financial future. Company officials concede that the current housing crisis is the most severe cycle in the company's history.

Julie Ann Amos
October 5th 2007

Recent News

• Supermarket Chain Builds Personal Finance Business
  The name "Kroger" has become synonymous with deli, freezer, and bakery items. But the supermarket giant is also making a name for itself in the personal finance business. [8th October 2007]


• Foreclosures Skyrocket Once Again
  The housing market took a substantial hit in August, as the number of foreclosure filings doubled over the previous August's totals. The increase also represents a 36% rise from the July totals. [5th October 2007]


• Consumer Credit on the Rise
  The Federal Reserve is reporting that consumer credit is once again on the rise. The rate of borrowing increased 3.7% in July. Still, the rate of growth was slower than it had been in June, when the rate stood at 5.9%. [5th October 2007]


• Homeowners Choose Credit Cards Over House Payments
  It used to be that homeowners would make sure they paid their mortgages before they paid any other bills. The thought was that the last thing on earth a homeowner wanted to lose was his or her house. [5th October 2007]


• Businesses Have a Tougher Time Obtaining Credit
  Small business owners are finding it more difficult to obtain credit these days. In some cases, business executives are being turned down for loans. [5th October 2007]