Posted on 08/10/2007 5:53:06 AM PDT by Hydroshock
Countrywide (CFC - Cramer's Take - Stockpickr - Rating) plunged 16% in early trading a day after the struggling mortgage lender warned in a regulatory filing that mortgage market disruption could hurt the company's financial condition.
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"Since the company is highly dependent on the availability of credit to finance its operations, disruptions in the debt markets or a reduction in our credit ratings could have an adverse impact on our earnings and financial condition, particularly in the short term," Countrywide said in the risk factors section of a filing made late Thursday.
Countrywide shares have been tumbling since problems with the subprime mortgage market came to light back in February. The stock hit a 52-week high of $45 just before rivals like HSBC (HBC - Cramer's Take - Stockpickr), New Century (NEWCQ - Cramer's Take - Stockpickr) and NovaStar (NFI - Cramer's Take - Stockpickr - Rating) said they would take big losses on loans gone sour to homeowners with poor credit histories. New Century subsequently filed for Chapter 11 bankruptcy.
Countrywide dropped as low as $23 Monday amid worries about the health of the credit markets before bouncing back during a widespread market rally earlier this week.
Shares fell $4.61 early Friday to $24.05.
That's not gonna make you vote for a Democrat in 2008, is it?
Here is a summary from a study on the cause of the crisis and its actual cost.
The savings and loan crisis of the 1980s and early 1990s produced the greatest collapse of U.S. financial institutions since the Great Depression. Over the 1986–1995 period, 1,043 thrifts with total assets of over $500 billion failed. The large number of failures overwhelmed the resources of the FSLIC, so U.S. taxpayers were required to back up the commitment extended to insured depositors of the failed institutions. As of December 31, 1999, the thrift crisis had cost taxpayers approximately $124 billion and the thrift industry another $29 billion, for an estimated total loss of approximately $153 billion. The losses were higher than those predicted in the late 1980s,when the RTC was established, but below those forecasted during the early to mid-1990s, at the height of the crisis.
What question stands, what do you think the short term and long term effects to the markets of the housing bubble?
I don't know. That's why I'm not making predictions.
While my ARM is capped at a reasonable level and I pay principal, increases in interest rates + increases in real estate taxes from Greenspam's RE price bubble + increases in energy costs have definitely cut into what I am spending supporting my local merchants. Based on my spending patterns, my favorite restaurants and wine merchants must be feeling the squeeze.
The time to have stopped this was in 1982 when Greenspan was made Fed Chairman and abandoned all of his previous pronouncements on sound money. There has been no risk premium in the financial markets since that day, but were are finally seeing a sign that risk premiums might be coming back.
Yeah. We already are. They just jumped us up to 12% from 6% and I did not know this until I logged into my account.
I think you mean 1987.
Extended recession. Steep decline in stock market. Dramatic rise in unemployment.
What kind of ARM jumps 6% in one shot? How long was it at 6%?
When does it start? How much does GDP shrink in 2008?
Steep decline in stock market.
How low will we go?
Dramatic rise in unemployment.
How high?
Gee, I don’t know. Wait, you’ve convinced me — everything is peachy. Yeah, that’s the ticket.
Where did I do that? Oh, wait, you’re smoking something.
Other than the confusion of a multiple number of mortgage holders..., nothing! Having long ago "been there done that..., got the T-shirt"... SAVE ALL DOCUMENTS (INCLUDING COPIES OF MORTGAGE PAYMENT CHECKS) FOR THE FORSEEABLE FUTURE!
You have NO idea how much time you may have to spend convincing future holders of your mortgage that you HAVE NOT MISSED PAYMENTS!
It’s your renowned middle school debate team tactics. They’ve won me over to the side that believes everything is just peachy keen forever.
Don’t bogart that joint.
I retired from mortgage banking in July, 2000 which was about the time the “Big Bank of the Northern Hemisphere” started introducing various loan programs such as no income verif., low doc-no doc, financing of 2nds for DP’s and other creative ways to “make it easier” to qualify for a loan.
At the time there were basically 3 types of ARMs; 3-1-1, 5-1-1 and 7-1-1 (or 3-2-1, 5-2-1 and 7-2-1) with no prepayment penalty and several had different indexes (libor, coffee just to name two). ARM loans could only adjust after the initial 3, 5 or 7 year cutoff and depending on what the market was doing could only adjust upward or downward by 1 point. Have they removed the caps?
I’ve read where there are now ARM’s which do contain prepayment penalties as well as negative amortization which I thought had been made ‘illegal’ after we went through a bad stretch back in the 80’s with the GPM’s, EOM’s and other creative financing. Have terms changed that drastically since I left the business?
I cut my teeth on mortgage loans back when people were panic buying before interest rates went up to 15% or 17%. They felt as if they’d be priced out of the market because interest rates could only contine to rise so they’d accept interest rates as high as 17% as they just knew rates would eventually reach 25% or more. Then went through the bail out certifying Ginnie, Fannie and Freddie pools.
Seems as if lenders didn’t learn their lesson from the previous run of creative financing.
“So you had to go to a hit piece from a liberal newspaper to get the incorrect use of the word bailout and a fictional statement of the cost.”
So here is a hit piece from the FDIC. Here is an excerpt from the FDIC papers.
http://www.fdic.gov/bank/historical/s&l/
1989—President Bush unveils S&L bailout plan in February. In August, Financial Institutions Reform Recovery and Enforcement Act (FIRREA). FIRREA abolishes the Federal Home Loan Bank Board and FSLIC, switches S&L regulation to newly created Office of Thrift Supervision. Deposit insurance function shifted to the FDIC. A new entity, the Resolution Trust Corporation is created to resolve the insolvent S&Ls.
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