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Countrywide's Mortgages: They Can't Really Change A Thing

Angelo Mozilo
Angelo Mozilo

Is it possible to be bleary-eared? I’ve just hung up from a two-hour conference call with Countrywide’s top dogs and all the top analysts that cover the company. I can’t say I learned anything new, except that CEO Angelo Mozilo admitted openly that the SEC is investigating his stock trades. We knew that already, but that was the first time he said it.

Then there are the things I really can’t believe he said, like that Countrywide is actually poised to gain market-share because so many other lenders went out of business, thanks to the shoddy lending practices being employed by all of them. I don’t doubt that it’s true, but should he really be saying that out loud?

Then there was Mozilo’s Caesar-like declaration that Countrywide is the sole survivor of the worst credit nightmare he’s seen in his quarter century career in the lending business. First of all, I don’t get it. Granted they didn’t go out of business, like dozens of others, but I believe there are still a few other companies in the mortgage game, like, oh, I don’t know, Indy Mac? Wells Fargo??

Oh, and I’m still trying to figure out how the heck Countrywide can claim that it’s refinancing or modifying $16 billion worth of loans, when it doesn’t own all those loans, it just services the bulk of them. My trusty "Realty Check" producer, Jill Thompson, spent much of yesterday calling those in the know who would know, because of course Countrywide wouldn’t call us back. She got every answer from they can to they can’t.

But then, finally, two hours into the earnings call, Howard Shapiro, one of my favorite mortgage experts (of Fox-Pitt Kelton Cochran Caronia Waller), asked the question flat out. Who has the legal authority to change these loans? There was a short: “The servicer,” from one of the C’wide underlings. “So you guys can do that?” Shapiro asks. Answer: “Yes.” My, not a lot of elaboration there.

But then, after a question on something else, Mr. Mozilo himself jumps in and says he wants to clarify the earlier question: “We have the authority to modify the loans within the parameters of the servicing contract...this will vary from investor to investor.” In other words, if the contract says they can’t modify the loans, then they can’t. Precisely what several experts told me yesterday.

So all this talk that Countrywide is going to save every borrower in trouble is, in part, just a lot of talk. By law, by legal contract with at least some of the Wall Street folks who bought the loans as nice big packages, they can’t change a darned thing.

Questions? Comments? RealtyCheck@cnbc.com

  • Diana Olick serves as CNBC's real estate correspondent as well as the editor of the Realty Check section on CNBC.com.

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