Monday, August 27, 2007

Countrywide Exposed

The NYTimes once again earns my readership, this time exposing Countrywide Financial for all the fees it charges borrowers and for steering people to loans they don't need or are too expensive:

A few weeks ago, the former sales representative priced a $275,000 loan with a 30-year term and a fixed rate for a borrower putting down 10 percent, with fully documented income, and a credit score of 620. While a F.H.A. loan on the same terms would have carried a 7 percent rate and 0.125 percentage points, Countrywide’s subprime loan for the same borrower carried a rate of 9.875 percent and three additional percentage points.

The monthly payment on the F.H.A. loan would have been $1,829, while Countrywide’s subprime loan generated a $2,387 monthly payment. That amounts to a difference of $558 a month, or $6,696 a year — no small sum for a low-income homeowner.

My business also got more than one loan for Countrywide, and several more loans were serviced by Countrywide. I can proudly say we used Countrywide only to exploit their lax lending standards.

On the negative side, all this subprime mess should have been even more obvious than the turn in the real estate market. I saw firsthand the bs that went in to so many mortgages, and so that so many are having problems should be no surprise at all. And while we sold the vast majority of our properties before the market turned (though we now have about the same number), this should have been an easier prediction.

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