Prospering Through The Sub-Prime Crisis

Why should the lenders of disaster worry? They're the "victims" getting protection and a pass from Our Leaders, not the true victims, the borrowers.

Fox Bidness Journal:

Countrywide Financial Corp.'s stock price rebounded sharply from its recent lows as the mortgage lender said it will eke out a modest profit in the current quarter after recording a $1.2 billion loss for the third period.

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Foreclosed real estate held by Countrywide totaled $676.1 million at the end of the quarter, up from $251.2 million at the end of 2006.

The damage has spread well beyond subprime loans, those made to people with weak credit records. One area of concern is the $26.8 billion of option adjustable-rate mortgages, or option ARMs, held as investments by Countrywide's savings bank. These loans, though classified as prime, are risky because they allow minimal payments in the early years but leave borrowers exposed to much higher ones later. Excluding loans made this year, payments were at least 90 days late on 3.3% of these loans as of Sept. 30, up from 0.3% a year earlier.

Like other lenders, Countrywide has had to become far more conservative after years of lax lending. It is demanding bigger down payments and adding restrictions to loans for investors and people who don't fully document their incomes or assets. Under the new guidelines, Countrywide said, 89% of the option ARMs granted in 2006 wouldn't be made.

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Fresh foreclosure figures for California, Countrywide's biggest market, illustrate the challenge ahead. DataQuick Information Systems, a La Jolla, Calif., real-estate research firm, said the number of notices of default -- which can be filed when mortgage payments are 90 days late -- totaled 72,571, more than double the year-earlier level and topping the previous record of 61,541 in the first three months of 1996. About half of the defaults were concentrated in the region called the Inland Empire, which consists of two counties east of Los Angeles, and in the Central Valley, the heart of California's farm belt.

Fewer than half of the homeowners in default emerged from the foreclosure process by bringing their payments current, refinancing or selling their homes, compared with 81% a year ago, DataQuick said. Many homes had multiple loans, complicating negotiations with lenders. The number of California homes lost to lenders in foreclosure totaled 24,209 in the quarter, seven times as high as a year earlier and the highest level in DataQuick's statistics, which go back to 1988.

And see how the lenders whine here.