I hate to see anyone loose their job. I have friends at Countrywide, they are good people. But I won’t be sorry to see Countrywide get out of the wholesale business. In fact, I’m rooting for it to happen. Brian Brady is worried BOA will destroy Countrywide. Matthew asks, “what about mortgage brokers“? The fact that Bank of America dropped their own wholesale division near the end of 2007 most certainly creates an aura of foreboding for CW’s wholesale division.
My opinion… Good freakin riddance. I can’t stand Countrywide. They might just be the single biggest reason the industry is where it is. Here’s why:
Countrywide’s standards for approving a broker have been ridiculously low. This is based on my own experiences calling on brokers. It used to be hard to become approved with lenders. Brokers had to submit resumes, document multi-year experience, and prove a minimum net worth. Early in this decade, Countrywide lowered the bar. I would call on offices with a dozen or so “loan officers” dressed in Metallica T-shirts and torn up jeans. They would ask me insightful questions like, “wait, what’s a 1008?” My company wouldn’t approve these offices, but Countrywide always did. Eventually, the lower standard infected the entire wholesale industry. Today, mortgage brokers demand about as much respect as used car salesmen. Thanks to Countrywide, that’s all the respect most mortgage brokers deserve.
Countrywide soon found that brokers who could barely read and write often had a hard time structuring and processing loans for approval. In the 90’s, when a client was self employed, they still qualified for a conforming loan. All it took was two years tax returns and some basic accounting by the loan officer. Yes, you actually had to comprehend tax forms. This was all to much for most of Countrywide’s broker base. So they introduced the “Nice and Easy”. This was a stated income loan that was billed as being nice and easy for the borrower. But wait, how hard is it to hand a loan originator a tax return? It was nice and easy for the loan officer who didn’t know how to get the borrower approved on a conforming loan. It was also nice and easy for the under-qualified underwriter working at Countrywide to decipher. Stated income loans became the norm for borrowers who didn’t actually need stated income loans. The proliferation of these loans invited much of the fraud that has placed us in this debacle. Countrywide was a key player in making that happen.
Countrywide didn’t invent the Option ARM, but they were key in propagating it’s misuse. I first sold this product working at National City in 2004. It was designed as a was to help investors, or borrowers with unstable income streams to manage their cash flow. By 2006, it was a tool for telemarketers to entrap naive borrowers into a bad loan. Countrywide regularly paid brokers more for these loans than any other lender. The worst part about it was that those fat checks were funded by higher margins for consumers. We all know that consumers don’t understand how margins on ARMs work. Heck, I doubt most of the loan officers selling the product even understood. Today’s foreclosure rates are largely driven by consumers who didn’t understand how ARMs actually work. I thank Countrywide for playing a central role in the matter.
Again, there’s lots of good people working at Countrywide. At a personal level, I hate to see them loose their jobs. On the other hand, Countrywide’s exit from wholesale would leave the last lenders standing in a great position. I’m not saying that any or all of these lenders weren’t responsible in their own ways for where we are today. But if Countrywide’s fall helps saves even one other lender, I’m all for it. Anyone but Countrywide is an improvement in my eyes.
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{ 23 comments… read them below or add one }
Hey, don’t hold back. Tell us how you really feel.
I doubt many people are sad to see Countrywide go.
Todd, I think it was called ‘Fast & Sleazy’.
Is WAMU next?
I don’t know a soul except for those working at CW (even then, I’m not so sure) who won’t be sad to see that blood sucking company out of business. I’m sorry about the job loses, but maybe more oportunities will open up once these guys are shut down.
Todd, how do you feel?
I’ve known a couple really great loan officers who worked with CW and I really like them. One since moved on to another company and the other is HUGE here in suburban Kansas City.
Frankly, I have no allegiance to CW in any way shape or form. My allegiance tends to follow the LO’s…so long as the rates are still great, etc.
Whether or not CW stays whole is immaterial to those that know their business. I say all the time about my real estate sales that red sign, blue sign or plaid sign, it doesn’t make any difference to my performance.
I would put my money on them keeping the wholesale division, but time will tell. They have been looking at Countrywide for a long time. They just probably didn’t realize what a great deal was on the horizon. They got a fabulous deal, and this is good for the entire economy. Because they have been looking at Countrywide for a while, I wonder if they didn’t close their wholesale division, knowing that they were likely to obtain Countrywide in short order. Because of the infusion of cash they gave to Countrywide, they have been looking at the books for a couple of months. If wholesale is profitable, they’ll keep it.
Many many lenders are giving up wholesale because the retailers (brokers) have every incentive to lie (it’s not their money) and originate bad mortgages. My husband works for Countrywide and was with CTX Mortgage before that. And before that we worked for a broker where the owner routinely fudged income, even forged clients’ signatures to expedite a transaction.
Jeff found that Countrywide was far stricter than CTX and NV brokers about advertising and originating, the objective being to avoid even the appearance of impropriety. For example at CTX and the broker’s LOs had their favorite appraisers and would hire those who were the most “flexible” when determining the property value. At Countrywide the appraisal requests are farmed out randomly so that no appraiser has to feel pressured to push the value or feels beholden to an LO. In addition, advertising is strictly controled so an overzealous LO can’t make misleading statements. It seems to me that the lender under the most scrutiny is the one making the greatest effort to avoid making questionable loans. And don’t forget that Countrywide (the bank) now retains many of these loans and therefore has no incentive to make bad transactions. And at least in Nevada Countrywide is viewed favorably – the local offices are very well managed and the rates can’t be touched. Jeff closed just over $4 million this month and it’s only the 11th. I don’t think many readers here would say no to that.
Gina,
Like I said, lots of good people work for Countrywide. But how the retail division performs is not entirely relevant to how their wholesale department operates.
Brokers may have “every incentive to lie”, but it’s the lenders who dangled the incentives. It’s the lenders who made the rules. It’s the lenders who approved the loans. It’s the lenders who neglected their QC. It’s the lenders who lowered the bar as to who they would do business with. Countrywide Wholesale was pioneering these practices.
One other note. I received an unbelievable amount of email today from employees of other lenders. For obvious reasons, they aren’t going to comment publicly. But let’s just say this was a very popular post.
It is my opinion that those ceasing wholesale originations are more concerned about market share than quality control. Clearly on a national level there are fewer borrowers capable of acquiring a loan approval. B of A, National City and other regional players want to increase their chances of landing these borrowers. Remove the wholesale aspect, offer no cost closings or other incentives and you remove the MBB chances of shopping for these borrowers.
Anyone want to wager that B of A and Nat City will re-open wholesale once they measure a drop in market share? It’s a down the road vision but I’m betting on it.
When I made the switch from Subprime AE to Alt-A/Conf AE, (Dec 2006), I trained with a couple of underwriters who had recently left CW. They told me the left because they where not comfortable approving the loans they were being told to approve. I think that says a lot! Volume initiatives took priority over underwriting. There are good people at CW, they are being overlooked as the poor decisions made by management make better headlines.
I think it comes down to Countrywide being a huge company and like most huge companies there is some variance in how regions and branches are run. You can always find examples of bad behavior in a specific location while others may be exceedingly ethical and well-run. And that applies to all of them, from WAMU to Wells Fargo to B of A. I think it’s time to get off the “lets pound on CW” bandwagon because it’s unfair to paint everyone with a single brush. As you said, lots of nice people work there and they have been through enough. The one I’d like to see strung up is Mozilo, who after dragging the company into the mud vaults out of there with a package worth $66 to $157 million, depending on who is reporting it. That guy is the Al Davis of lending, he has discredited the company, cost people their life savings and / or their jobs, then he oozes off into the sunset with a huge wad of cash. He is the one who deserves the scorn so rightly heaped on him by industry insiders and consumers alike. With any luck he’ll need that huge severance package to make bail…
First, CW will, at a certain point become BofA..period..CW wil not exist..Poof.Gone.
Second, Does BofA have wholesale? NO..Will CW become BofA? Yes..So anwer is THERE WILL BE NO WHOLESALE..Since they will become BofA..
“Many many lenders are giving up wholesale because the retailers (brokers) have every incentive to lie (it’s not their money) and originate bad mortgages”
Gina, that’s an irresponsible statement. Lying on a loan application or inducing a borrower to lie is a federal crime. It also shows a real lack of understanding for the wholesale lender/broker relationship and the contractual agreements.
I’ve worked for direct lenders and brokers; bad apples work in both channels. Furthermore, I’ve had more than one wholesale AE deliberately throw out paperwork from a file. Why would he do that? It wasn’t his money! It wasn’t even his company’s!
Gina, CFC doesn’t lend their own money; they lend Wall Street’s money and depositors’ money. The argument of “skin in the game” is factually incorrect.
THERE WILL BE NO WHOLESALE..Since they will become BofA.”
Betcha BofA re-establishes wholesale once a sustained recovery is demonstrated. BofA has been in and out of wholesale many times already.
I find the term “skin in the game,” incredibly ironic. Let us not forget who really screwed things up with the implementation of the SIV, CDO, CMO and other complete BS instruments. Those with skin in the game proceeded to rip it off of each other.
So what happens when people “loose their job,” exactly?
Makes it tough to take the rest of the commentary seriously when the first sentence contains one of the most annoying spelling errors ever.
Didn’t mean to be iresponsible re: banks closing their wholesale division. However, fraud perpetration is the reason that several wholesale reps from WAMU and others gave me for pulling out. And I know that both WAMU and CW have portfolio products that they hold or buy and sell in order to manage risk effectively.
Countrywide employees were told on 1/11 that B of A wants to work the banking side and Countrywide will handle the mortgage side. B of A selected CW because of its technology which makes loan origination very efficient and inexpensive, its servicing arm, its geographical coverage in areas that B of A is weak, and its wide variety of products. LOs were told that nothing would change for at least a year, and that, like MBNA after B of A bought it, CW might keep its CW name, with the addition of the phrase “A Bank of America Company.”
They made no reference to CW wholesale but I would expect that “no changes” means it will stay unless the parent company finds it to be burdensome.
http://news.yahoo.com/s/usnw/20080201/pl_usnw/state_groups_ask_congress_to_investigate_bofa_countrywide_merger
The California Reinvestment Coalition, Community Reinvestment Association of North Carolina, Neighborhood Economic Development Advocacy Project, and New Jersey Citizen Action each sent letters today to Chairman Christopher Dodd (D-Conn.) of the Senate Banking Committee, and Chairman Barney Frank (D-Mass.) of the House Financial Services Committee, urging “investigative hearings” surrounding the pending merger between Countrywide Financial and Bank of America.
The groups said in a press statement Friday, they want Congress to ensure that a plan is drafted “to guarantee borrowers will be offered affordable, fixed rate loans that will enable them to keep their homes.” “Working families and communities will suffer if Bank of America is allowed to take control of Countrywide’s portfolio without stringent oversight, and without a concrete commitment to work with distressed borrowers to prevent foreclosure,” said Josh Zinner, co-director of the Neighborhood Economic Development Advocacy Project of New York City.
Reminds me of an old saying, “if you lay down with dogs you wake up with fleas.” Apparrently these consumer activist groups see it that way.
I’m betting that Bank of America ditches the Countrywide brand as soon as the take over is complete.
I am a current CW employee working in the Wholesale division. The comments that I will make may or may not matter to your readers but I must get them off my chest.
Each month the Wholesale Division lets go 5 to 10% of its employees. They do that monthly in my opinion to prevent having to pay us based on the WARN act. (Sometimes they have to anyway)
Each month I listen to senior level staff giving speeches to motivate the ones who are still here. What I find troubling is that these senior managers are expensing dinners that cost up to $800.00 and we cant copy in color. They expense cocktails and stay at the BEST hotels, which are not within CW policy, but no one seems concerned. Soon they will be having an event in Florida and the amount being spent on that event is scary. Some are staying in a suite which cost 6k a night; you have each invitee bringing a friend or spouse. I know its important to pump up the volume and get people motivated, (Its a top sales event) but the regular corporate employees who are at this point spending 10 to 14 hours a day in the office are the ones being laid off and the senior staff are spending like CW is still the fat company we were five years ago. Its just not true, we have been fighting for our jobs here and taking on extra work loads each month as they let more go. I wonder if Andrew Gissinger is aware of how much money these managers are spending against corporate policy or if anyone is even paying attention. If I were BofA and looked into the spending habits of these executives, I would not keep them on board if I DID decide to keep the division.
Mia,
Your comments do matter to this reader and others I’m sure. Lenderama is a great outlet for such comments or what are sometimes referred to as rants. I am of the opinion that speaking out is what blogging is all about. Keep your head up and reinvestigate your options. When one door closes, another always opens. Wishing for you only good things.
Howard,
Thank you, I appreciate your words very much. I am sure that at some point I will be moving on. I’ve never blogged before, so it’s nice to experience a place where I can rant.
All the best to you,
Mia
Howard is exactly right. Lenderama is a place where you can speak your mind.
Mia, your comments are appreciated.
Thank you, Howard. I did speak my mind with reservation. I’ll let you know when I get “axed”.
Mia,
I am looking to PURCHASE a home that CW has as REO. I need help fighting red tape! The home is vacant. I have a special needs son that this home/area would be perfect for. If you can help direct me thru a CW maze, you could make a huge difference in somebody’s life. Any help would be greatly appreciated. Thanks!
I totally agree that Countrywide is a big reason that we are in the position we are currently in but I have to also throw out Ameriquest!!! I think they were one of the worst to deal with and I know from personal experience their Wholesale division Argent Mortgage was a joke. All you needed was a pulse and they would give you a loan. I definitely agree that I wouldn’t loose any sleep if CW wholesale division went away!
I don't know a soul except for those working at CW (even then, I'm not so sure) who won't be sad to see that blood sucking company out of business. I'm sorry about the job loses, but maybe more oportunities will open up once these guys are shut down.