Countrywide Financial

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Countrywide Financial

• 1969 Founded by Angelo Mozilo and David Loeb
• 1969 Went public, less than 1 per share
• offered FHA and VA loans only
• 1974 opened branch offices
• 1982 -2003, Delivered investors a 23,000 return
• 2006 financed from 17 to 20 of all mortgages in
  the United States
• 2007 19 of its subprime loans were in default

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How it worked

• Countrywide sales people market loans
• Charges variety of fees to originate the loan
• Sells bundles of loans on the open market
• Countrywide still administers loans, collects
  fees for late payments and processing defaults.

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Typical FHA loan

• 30-yr. fixed
• Good credit rating
• Max 200,000 loan
• 7 interest, 1pt. (7.25, no points)
• 1 loan origination fee
• 2.25 downpayment - 5,000
• Pay 700/mo.
• No prepayment fees
• Much paper work

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Paying off a 30-year fixed rate loanmonthly
payment
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Subprime loans

• Any amount (not FHA, slightly higher rate)
• Adjustable rate 2-3 years at a fixed
  rate,(lowers the interest rate)
• Teaser rates (with prepayment penalty)
• Poor or No credit history (much higher rate).
• Points added to mortgage amount (raises rate)
• High loan origination charges
• Bridge loans for downpayment

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Why buy Countrywides loans?

• Much higher interest rate.
• Loan backed by value of property.
• BUT
• Interest rates rise
• Loans default
• Subprime loans disappear, no refinacing available
• Property drops in price