Sunset over Scotts Flat Lake from my deck 2/3/11 In the background is the Coast Range

By John J. O’Dell

Finally some justice against Countrywide Financial Corporation for all of their shady lending practices..  They created mortgage loans which were bound to be foreclosed on.  Here’s a press release from the office of the Attorney General of California explaining what they did:

Attorney General Kamala D. Harris today (February 2, 201) announced a $6.5 million settlement of a predatory lending case against Angelo Mozilo and David Sambol, former officers of Countrywide Financial Corporation. Attorney General Harris announced the settlement money will be used to establish an innovative statewide California Foreclosure Crisis Relief Fund to combat the effects of California’s high rates of foreclosure and mortgage delinquency.

“Our prior settlement with Countrywide provided restitution for foreclosed homeowners and set in motion loan modification programs that have helped tens of thousands of consumers,” Attorney General Harris said. “We will use the current settlement to help Californians affected by the mortgage crisis by providing grants to agencies that help homeowners facing foreclosure with relocation assistance and providing money to state and local agencies to prosecute mortgage fraud.”

This settlement concludes litigation filed by Attorney General Edmund G. Brown Jr. in June 2008 against Countrywide Financial Corp., Countrywide Home Loans and Full Spectrum Lending, as well as Mozilo and Sambol. The financial relief provided under the current settlement augments the Attorney General’s October 2008 settlement with Countrywide to provide loan modifications and other foreclosure relief valued at $8.68 billion nationwide, with $3.5 billion provided to California borrowers.

According to the lawsuit, leading up to the mortgage crisis, Countrywide lured borrowers with low “teaser” rates often as low as 1 percent adjustable rate loans. Its loan officers obscured the downsides of these loans, which included rapidly rising rates after teaser rates expired, big prepayment penalties, and negative amortization in which a borrower’s total loan costs rose even as additional payments were made. Countrywide also loosened its mortgage standards and verification procedures in order to write more loans.

As a result of these practices, tens of thousands of homeowners with Countrywide loans ended up in default and foreclosure. The Attorney General’s lawsuit alleged that Mozilo and Sambol knew of these practices and allowed them to continue.

The complaint alleged that Countrywide sought to increase its share of the nationwide mortgage market to 30 percent through a deceptive scheme to mass produce loans – with little concern about borrowers’ long-term ability to afford them. It then would sell the loans on the secondary market to earn the highest possible premiums.

The settlement with Mozilo, the CEO of Countrywide, and Sambol, its president, was filed today in Los Angeles Superior Court. Mozilo and Sambol left Countrywide when it was purchased by Bank of America in July 2008.”

Source: Attorney General’s Office

So what do you think?

For all your real estate needs Call

John J. O’Dell
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(530) 263-1091

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Bank of America has created a new website called Bank of America Home Loans for borrowers that includes a calculator that determines not just what size loan people can qualify for, but how much they can spend without being stretched too thin. “We wanted to change the conversation to ‘How much house can I comfortably afford?’ rather than ‘What’s the maximum I can buy?’ ” said Aditya Bhasin, the product, pricing and strategy executive for Bank of America Home Loans.

The site is designed to be easy to read, spelling out a variety of contingencies, including the maximum payment that an adjustable rate mortgage could potentially cost.

The new site also offers what BofA calls Flat Fee Mortgage Plus, which has no application fee and a single closing fee that includes processing costs and fees for third-party services like appraisals.

Not included are other standard costs like property taxes, homeowners’ insurance and prepaid interest.

Craig Focardi, a senior research director at the Tower Group, a financial consulting firm, said the idea for the plan is nothing new – it’s been tried by others. But the prominence of the programs could persuade competitors to adopt the features.”

If you recall, Bank of America took over Countrywide Lending and renamed it Bank of America Home Loans. I’m not sure that their new website is not a rehash of Countrywide’s old website. But with B of A’s great customer service (tongue in cheek) they need some kind of P.R. to make them look helpful. Some related information on Countrywide Financial Corporation:

According to the LA Times 04/27/2009

“Linked more recently with high-risk loans, co-founder Angelo R. Mozilo’s huge paydays and FBI investigations, the Countrywide name became “too toxic to resuscitate,” as another expert puts it — and a liability for Bank of America Corp., which snatched it up last year as it neared collapse.

And so over the weekend, nearly 10 months after the Bank of America deal closed, Countrywide Home Loans signs came down and Bank of America Home Loans signs appeared at the lender’s 215 storefront offices in California. It was the start of a rebranding of nearly 1,300 Countrywide mortgage offices nationwide.”

Yep, Countrywide and Bank of America, great combination.

"Alternative Housing" Location, Oregon

What the figures show for April of this year is that residential sales are about the same number as it was for April of last year.  However, we’ve had a further decline in medium residential home prices of minus 23 percent. Here are the stats for sales in Nevada County.

There were 67 residential properties sold in April 2009 compared to 62 residential sales in April 2008.  Total residential sales from January to the end of April 2009 were 191 sales compared to the same period last year of 203 sales.

The medium price for April 2009 was $299,000 compared to April 2008 of $387,500 a decline in market price of 23 percent.  There were 1,165 residential properties listed for sale at the end of April, which based on the number of sales from January to April 2009 equals about 1.6 years supply of residential property for sale, assuming sales continue at the same rate.

There were 20 land sales from January to April in 2009 with a 45 month supply of land at the end of April. Last year there were 45 land sales with a 49 month supply of land.

I’ve noticed a pickup in pending sales, which I post on this website daily for those that are interested, and it seems that the pending sales are up. They have been hovering in the 200 pending sales starting within the last month. However, this is for all sales, not just residential sales.

Where are we with future sales? It’s anyone’s guess, Fannie Mae and Freddie Mac asked lenders to forestall any more foreclosures until March 6, 2009.  What they are doing now that the agreement date has expired? Some circles say we are in for a tsunami of foreclosures. The following banks had agreed to the government’s request and their expiration dates of the agreement. 

JP Morgan Chase - New Owner-Occupied residential loans that are owned and serviced by JPMorgan Chase.  As with Fannie Mae, the moratorium of foreclosures end date, March 6th.

Citigroup – All Citi-owned first mortgage loans that are principal residence and on loans for which understandings with investors have been reached.  Moratorium end date – March 12th.

Bank of America (also Countrywide now renamed Bank of America Home Loans) - Delay foreclosures sales on owner occupied properties whose mortgage loans are owned and serviced by B of A or Countrywide  – Through March 6th.

Wells Fargo (also Wachovia) - For Loans it holds.  The moratorium is expected to remain in place until the government’s foreclosure prevention plan is announced.  The majority of Wells Fargo’s mortgage loans are serviced by it and owned by other investors. 

American International Group also well known as AIG, and Countrywide Financial Corporation have sued each other. Countrywide sued AIG’s United Guaranty Indemnity Company for breach of contract in a dispute over insurance losses for subprime mortgage loans now in default.

In turn, AIG sued Countrywide last week in a California federal court, contending the lender had misrepresented risks tied to more than one billion dollars of mortgage loans that United Guaranty insured.

According to Reuters  ”United Guaranty said in its court papers that unlike the traditional use of mortgage insurance, used to facilitate home purchases by responsible borrowers, Countrywide wanted coverage to increase the credit rating of its mortgage-backed securities offerings.

It said Countrywide traded on a long-standing relationship between the two companies to induce it to insure loans it says were too risky and not issued according to proper underwriting standards. It says it has already paid out insurance claims of more than $30 million tied to the Countrywide loans and is exposed to additional claims of “several hundred million dollars more.”

A Bank of America spokeswoman declined to comment on the litigation on Friday. The bank bought Countrywide, once the largest U.S. mortgage lender, for about $4 billion in stock last July as the lender’s risky subprime mortgage loan business began to fail.

An AIG spokesman said Countrywide made misrepresentations and did not follow appropriate underwriting standards, and as a result “exposed us to claims we would not have had to pay out. Now we want the court to order them to make us whole.”

If I had to bet who is going to win this lawsuit, I would place my money with AIG. Having heard much about Countrywide lending practices while we were in a heated real estate and mortgage lending market, I don’t think AIG is going to have much trouble finding problems with the way Countrywide made their subprime loans before the company went belly up. But anyhow, that’s just my opinion based on hearsay.

By the way, can Congress get over the bonus that AIG gave out and get on with the important business of getting this Country back up and running? I think the news media and Congress have spent enough time on this that the CEO’s of large corporations “get it”.

Mortgage rates are dropping to near record lows – below 5%. This is in the wake of the Federal Reserve’s decision to buy up Treasury bonds and mortgage securities. Lower rates may help spur home sales, but analysts expect much of the action to come from homeowners seeking to refinance.

If you are in the category of refinancing, expect tighter rules and regulations, meaning you have to have a good credit score, equity in your home and there will be tighter debt to income ratio requirements. Keith Gumbinger of HSH Associates, a publisher of mortgage information, said good interest rates were available to all kinds of borrowers in all kinds of credit circumstances when the market was running flat out five years ago. That’s not the case today. “You must be a much better borrower than you had to be before,” he said. “For some borrowers, you might have to get used to hearing ‘no.’”

Be careful when you apply for your refinancing. I have a client who is in the process of refinancing her home. She applied at Countrywide and had me look at what they were going to charge her to refinance. They started out with 2 points or 2 percent of her loan to as part of the cost for refinancing. In addition, they had enough garbage fees that the total refinancing would have cost her $11,000 for a $417,000 loan. I had her shop at two other loan companies, and her costs dropped to about $6,000. Countrywide, when they were made aware of the pricing from the other two mortgage brokers, dropped their cost to refinance to match the other two brokers.

Home buyers and owners who want to refinance should be prepared for a longer process, and for different rates or costs, depending on their credit scores and loan-to-value ratios. Now, there might be three or four different levels for transactions that previously would have been priced equally.

By the way, after April 27, 2009 Countrywide will shed its name that it had since 1969 and will be morph into Bank of America Home Loans. Bank of American acquired Countrywide, once one of the biggest subprime lenders last year. More on Countrywide tomorrow