Countrywide: A Sign of Good Times?

On TV today, I'm reporting a story about the mortgage bankers pushing back against the very premise of this whole subprime mortgage "crisis." The chairman of the Mortgage Bankers Association, John Robbins, is giving a speech at the National Press Club. It opens like this, "I stand before you today mad as hell. I have to be angry. It would be too depressing to accept that a very few unethical people can give my profession, and me, a black eye. But it's worse than that. It's not just our reputations that have been damaged. People have been hurt. The very people we take pride in helping. All because of a very few unethical actors."

The trouble is that politicians and state and federal regulators are all clamoring to toughen and tighten the industry, police the bankers and lenders and essentially treat them all like "unethical actors." And of course the bankers don't like that.

But Mr. Robbins also contends that the "crisis" in the subprime market really isn't as bad as we in the big, bad media make it out to be. Everybody needs to take a breath, is essentially what he's saying. A teeny, tiny percentage of all loans really will end up in foreclosure, he claims, and the good, big lenders will bounce back.

Today, I read something that may bolster his case. Countrywide Financial , one of the poster-children of heady subprime lending (but one that didn't go out of business), is apparently -- despite the "crisis" -- on an upswing. Countrywide is the third largest subprime lender in the arena, and its stock plummeted from $45/share to $32 in just the few months of the initial subprime media hype. The company admitted to a 19% delinquency rate on its subprime loans. Earnings were way down (-37%!) in the first quarter.

But somehow, it has turned things around and done it quickly. Investors are focusing on the fact that Countrywide shrunk its portfolio of subprimes from over 10% of the company's originations in 2005 to just 4% in April. They also note that, while the delinquency rate was high, actual foreclosures were 3.5% at the end of 2006. The stock is back up over $40.

So maybe Mr. Robbins has a point. Not to mention that Countrywide is also well diversified and not simply a subprime player like so many of those now-defunct operations (perhaps the unethical actors of which he spoke).

There is clearly life after the crisis, but I have to wonder. Many argue the crisis in the mortgage market has only just begun, with many, many more adjustable rate products set to re-set in the next year. The mortgage bankers may want to call a "bottom" to the crisis; I'm just not sure I'm there yet.

Questions? Comments?