March 07, 2008

Ruh-roh: "Countrywide's Risky Mortagages May Be Ballooning Out Of Control"


Seriously, when are we going to hear more in the MSM about liar's loans and option ARMs?

Because it's just so damn obvious what's coming next...

Maybe someone will ask Angelo today about these neutron bombs when he's under oath. Or maybe not. I'm not sure we can handle the truth..

Countrywide's Risky Mortagages May Be Ballooning Out Of Control

As of the end of December, Countrywide had nearly $29 billion in pay-option loans, with about $26 billion of the total having grown beyond their original loan amount, the company said in a filing late Friday with the Securities and Exchange Commission.

"Our borrowers' ability to defer portions of the interest accruing on their loans may expose us to increased credit risk," the company said. It added that its risk could be greater because the amount of deferred interest on pay-option loans was on the upswing.

The Associated Press says that the number of homeowners missing their interest-only payments is still increasing, and a staggering 81% of borrowers with these risky loans provided little or no documentation of their income.

As of the end of December, 71 percent of borrowers with pay-option loans were electing to make less than full interest payments.

12 comments:

Frank@Scottsdale-Sucks.com said...

"a staggering 81% of borrowers with these risky loans provided little or no documentation of their income"

Holy Crap. You can't even rent a dump of an apartment without proof of income. Unbelievable!

The impact of Alt-A and Option-ARM this year and the coming resets is frightening at best.

eric in vegas said...

There is no chance in hell BofA goes through with the buyout. August is a lifetime away and things are going to be much worse for Countrywide by then.

toaster strudel said...

the option arm people will be the first to walk away. I'll bet that MANY are already planning it. Why else would they be making the minimum payments?

Anonymous said...

So 81% of their NegAmOptARM are also liar loans, jeez that's a rather interesting and new hybrid mortgage product. But I'm sure with the magic of alchemy of securitization into MBS backed by monoline insurers and CDO derivatives and SIVs all that risk will disappear and a AAA rating will appear that will make them all a lucrative and stable long term investment!! HAHA I would hate to be BOA!! At least if it was a NINJA loan they would know w/ 100% certainty the FB was not going to be able to pay it back!!

happy homeowner in the stix said...

Is there anywhere you can find out how many houses were bought with these neg-am loans?

I figured a bunch of these people were paying just the minimum payment, but didn't think it would be nearly 3/4 of them. That's scary!

Stuck in So Pa said...

One of my "kids" at work is on the ropes with his interest only. He doesn’t know which way to turn. Already borrowed thousands from each set of parents to make monthlies, marriage getting rocky. Really nice guy, I tried to warn him. Oh well, you can only do so much!

David said...

How can I trust my credit card company Bank of America if they still want to buy the debacle known as Countrywide?

Anonymous said...

and as we speak about this Countrywide is still writing bad loans full tilt to get those commissions before they are stopped.

Anonymous said...

"Our borrowers' ability to defer portions of the interest accruing on their loans may expose us to increased credit risk," the company said. It added that its risk could be greater because the amount of deferred interest on pay-option loans was on the upswing.
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hey, look on the positive side, those differed interest payments get to be counted as income! Yipeee!

i've had it said...

We're screwed. Once the Alt-As start to reset in 2009 (the continue to reset until 2012 and are larger in total value than subprime) we are hosed completely.

Alt-A's are even worse Subprime? Why? Because after squeezing every penny out of those who could actually verify their income (which subprime required), they went after those who couldn't do that...that's what Alt-A's are. The pain will probably start well before Alt-A's start to reset because alt-a borrowers will simply walk away from their homes starting next year as they realize the housing market will not go up anytime soon and they have massive negative equity.

Anonymous said...

I'm issuing some Zero-coupon perpetual bonds. Trying to sell them to Countrywide at par. Wish me luck.

Anonymous said...

Oh God ,I guess they can't get those crap loans sold to the GSE's as long as they are up-side down in equity . I predict a new emergency law will come up that the Government Backed loans can now buy option one up side down loans after the equity has been crammed down . Countrywide needs to get rid of their loans . Can you imagine the Congressmen today giving Mozilo a pass on his compensation package . Ok,what about a non-pass for the faulty ,fraudulent lending that Mozilo was in charge of .