John's Florida Real Estate Blog


Countrywide Financial Goes Looking For Money

From many sources I am hearing that Countrywide Financial Corp. is borrowing money to meet its needs in a housing market that is currently on the ropes. Countrywide is one of the largest mortgage companies in the United States. My own mortgage is with them.

Word is that they had to borrow $11.5 billion to fund their loan obligations. As you have read in some of my recent posts, several smaller companies were not able to borrow funds, and therefore entered bankruptcy leaving buyers and sellers at closing tables with no money with which to fund the loans that they had been approved for. What a mess to say the least.

If the current credit crunch continues for many more months, perhaps even a giant like Countrywide could be forced to fall on its sword as well. That would be like an atomic bomb going off in the home lending world, in my humble opinion.

In order to limit its risk exposure, Countrywide has said that it will no longer fund many sub-prime loans or jumbo loans. These two types of loans do not conform to the industry standards that allow them to be readily sold on the secondary mortgage market. That is when one lender buys mortgages from another company. Some of you may have had this happen to you. When you first get your mortgage you make your monthly payments to XYZ Mortgage Company, but several months or years later you get a letter saying that your mortgage has been bought and will now be serviced by ABC Mortgage Company.

To ensure that their loans are saleable the lenders want them to conform to standards set by Freddie Mac and Fannie Mae. Sub-prime loans do not normally conform since the borrowers usually have poor credit records and jumbo mortgages do not qualify since they are for amounts greater than $417,000, the limit over which Freddie Mac and Fannie Mae will not purchase them. Both of these types of loans usually have higher interest rates than conforming loans. As you have no doubt heard on the news, sub-prime loans seem to be going into foreclosure left-and-right.

Due to its huge share of the mortgage market, what happens to Countrywide could have wide-ranging effects on everyone involved with buying, selling, building, maintaining, and furnishing homes. Hopefully this market will begin to correct itself and the public will once again have the confidence to make home purchases. So much of what happens is based more on perception than reality. Let's hope things get back on the right track SOON!

If you have any questions concerning this topic you can call me at: 813-783-4444 or e-mail me at: 

You are also invited to visit my webpage at:

John Elwell - REALTOR


Bill Nye Realty, Inc.


Licensed in Florida


Comment balloon 0 commentsJohn Elwell • August 17 2007 08:29AM


This blog does not allow anonymous comments