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No. 1 Home Lender Taps $11.5 Billion Line of Credit
Countrywide collects payments on 14 percent of all outstanding mortgages in the United States but is having to change its loan offerings.
(By Nati Harnik -- Associated Press)
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All these cuts mean borrowers have fewer options for home loans.
To regain its footing, Countrywide plans to further shrink its mix of mortgage offerings. It is eliminating or curtailing loans that have fallen out of favor with investors -- namely the ones that cannot be sold to Fannie Mae or Freddie Mac, the largest investors in U.S. mortgages.
Those government-chartered enterprises generally don't buy loans made to subprime borrowers, loans that exceed $417,000 or loans that require no down payment or no verification of income.
In a statement yesterday, David Sambol, Countrywide's president and chief operating officer, said he expected 90 percent of the loans that his company originates would conform to Fannie Mae and Freddie Mac standards.
Many analysts say that's a dramatic shift from the days of the housing boom, when non-conforming loans were wildly popular. But Countrywide has been tilting in the new direction over the past year. Now, it sells about 70 percent of its loans to Fannie Mae and Freddie Mac, one analyst said.
The company also said that to shore up its position, it plans to transfer its mortgage production from Countrywide Home Loans, its non-bank mortgage subsidiary, to another subsidiary called Country Bank FSB.
Countrywide Home Loans originates mortgages through brokers and other outlets and collects money from borrowers, said Vincent Arscott, an analyst and director at Fitch. Country Bank, created in 2001, gathers deposits and makes loans, just like any other traditional bank.
To the extent possible, Countrywide could use the deposits at the bank to fund its loans. The deposits are a more stable and reliable source of money, Arscott said.
In yesterday's statement, Sambol said he thought these moves would help the company survive turbulent times. "With these changes, we believe we are well-positioned to leverage opportunities presented by a consolidating industry," he said.
