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Funny Business
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Countrywide Tries To Fix Up Economy—No, Really
 |
AP |
But in a cavernous room in Simi Valley, California, a few hundred Countrywide employees, now working for Bank of America [BAC
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] are trying to fix the economy, one bad loan at a time. It's in this room, on these phones, that employees figure out which homeowners can be saved, and which can't. They tell me that out of three bad loans, two will get a second life, one won't.
"We'll make 13 million attempts to reach people this month, and we will have conversations with more than a million people," says Steve Bailey, Senior Managing Director for Loan Administration. Bailey has worked at Countrywide for 23 years, and I asked him if the 5,000 employees across the country working on modifying loans feel they're "having to clean up someone else's mess on the loan origination side." "I don't think so," he says. Instead, people here like to think of themselves as helping those in need.
I watched one of them in action. Tammy Tipton was on the phone with a man in trouble with both his first and second mortgages. Adding to the problems, both mortgages are owned by different outside investors (85 percent of the loans Countrywide services are not owned by Countrywide but by someone else who must approve any modification). "I'm going to be taking this to the investor, and I'm going to be requesting a step plan," Tipton tells the man over the phone. The step plan will lower the interest rate on his first mortgage to 4.375 percent for the first year, gradually increasing it to 6.375 in the third year, where it will remain fixed. As for the second mortgage, well, she'll try to see if the investor will budge. "I don't wanna get your hopes up regarding the second, but I'm definitely going to give it a shot," she says.
Countrywide is launching a National Homeownership Retention program December 1st to fend off several state Attorneys General. Between that program, plus the current ones at Countrywide and Bank of America, the combined company says it's committed to helping 630,000 borrowers representing $100 billion in loans. It says it's already helped 250,000 homeowners keep their houses.
It's a lot of work. Certain offices have "time out" rooms for employees who may be feeling a little overwhelmed on the phone all day talking to troubled home owners.
This first video clip is part of my interview asking Bailey about whether he feels he's cleaning up someone else's mess.
Some interesting facts Steve Bailey gave me: In 2004, three out of four people going into foreclosure could sell their way out of the problem. In 2008, only one out of a hundred is able to do sell the home for enough to pay off the mortgage. Sixty-one percent of those who stop paying their mortgages do so due to "significant loss of income," while only 3.3 percent of foreclosures are due to ballooning mortgage payments.
I asked Bailey if some people have stopped paying their mortgages intentionally--even though they have the wherewithal to stay current--just to cut a deal with Countrywide. "I think we're more worried about it than we've actually seen it," he says. But one thing Bailey is noticing is new maneuvering by some people seeking a short sale. "This is a market that absolutely invites people to try to game the system," he says. This next video clip is Baily giving a unique perspective.
Bailey also says Countrywide has one advantage over Fannie Mae. The loans Countrywide securitized have wording allowing for some sort of modification. He says Fannie Mae [FNM
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] loans don't. Fannie Mae may have been able to provide the highest yields on its mortgage-backed securities, but now it's stuck with having the hardest loans to modify. Bailey says the only real solution may be for Fannie to buy those loans back from investors and then modify them.
Finally, Bailey says it's hard to come up with a solution when a homeowner doesn't want to stay in the home. Seven percent of those in trouble with their mortgages don't want to be saved--they just want out. Maybe they've gotten divorced, or don't like the neighborhood. But most people do want to stay, and it's up to Bailey's employees to see if they can come up with a plan. "The hardest thing they have to do of all, though, is tell somebody that we don't have a solution for them," he says. "And it just breaks your heart."
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