More good news:
Countrywide Financial Corp., the nation’s largest mortgage lender, said Tuesday it swung to a loss in the fourth quarter due to rising loss provisions and impairment charges.
*** Update ***
by John Cole| 38 Comments
This post is in: Domestic Politics
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4tehlulz
So that’s what the kids call “making loans to unqualified applicants” nowadays….
Punchy
You’re SOOOOOOOOOOOOOOOO Atrios with your explicitly “good news” sarcasm and the requiste pithy yet curt synopsis of the applicable topic du jour.
How many angry people do you think are writing Countrywide checks omitting the “o” in their name?
rawshark
They take funds from my checking account twice a month so I can’t. Would be funny though.
John S.
It is amazing how much Orwellian doublespeak has invaded our language over the past few years.
They should just say:
TheFountainHead
Thanks for reminding me to pay bills this morning.
Walker
Damn, but the NYT sucks for financial news. That article misses the really big news. One out of three subprime loans held by CFC are delinquent. That NYT article reads like they are just having some problems selling new loans. In reality, they need to worry about whether their customers will pay them.
Zifnab
Remember when Dynegy went to sweep in and bail out Enron. And then Dynegy looked at Enron’s books and rain away screaming with tail between legs?
ThymeZone
Aw, quitcher bellyakin, all of you. We’re doing fine:
Buncha goddam whiners.
TenguPhule
Taxpayer funded bailout, full speed ahead!
Seriously, there should be a clause to corporate immunity that that allows us to shoot the officers if we have to bailout the company on the taxpayer’s dime, if only to discourage so many of them from doing stupid shit.
cmoreNC
Synopsis:
Countrywide loaned money to too many Wimpys to buy a hamburger too many times, taking “I’ll gladly repay you on Tuesday” as adequate assurance of creditworthiness. [Wimpy = Popeye cartoon character reference] Except the loans were for houses fancier than people’s budgets rather than hamburgers. The theory was that unlike loaning Wimpy money for hamburgers, loaning Wimpy money for a house was safe irregardless of creditworthiness because the loan was collateralized by a rapidly appreciating permanent asset. They never considered how much more like hamburger that house would be as collateral if the value depreciated rather than appreciated.
J. Michael Neal
Faced with an avalanche of bad news, Countrywide shares promptly plunged up 10%.
jcricket
What’s more hilarious is that CW was saying as recently as a couple of weeks ago they were going to post a modest profit after all their writedowns.
You just know BofA is going to try and get out of acquiring CW or try to lower their offer (from $4b to $2b or something).
We’ve seen companies unravel this quickly before, but never since the S&L crisis quite so many companies in multiple industries at the same time.
Again, the problem is that even if you let them all fail and their assets picked up for pennies on the dollar (a good capitalist process) the public still ends up suffering (for example, from the massive layoffs). Although one might hope against hope that this latest incident shows people that large capital markets end up FUBARing everyone when they are non-regulated.
jcricket
Ah, here’s the Atrios link with the juxtaposed prediction vs. actual CW results. Too funny.
Jake
CWide has been screaming for over a year that Everything is Just Fine, Nothing to See Here!
And then the inconceivable happens, and you know the deck chairs done slid overboard:
Gives the tag line in their ads a whole new meaning.
In related news, did anyone catch the 60 Minutes piece on the Subprime mess? I liked it when the number cruncher replied to industry claims that the problem was “contained,” by saying Yes, it’s contained; to the Planet Earth.
Haltelcere
A couple weeks ago I received a small check from Countrywide because I had overpaid into my escrow account. Don’t you know I cashed that check, before it bounced, as fast as my little legs could get me to my bank!
Walker
That’s not the real shocker with the 60 Minutes special. What is really going to make things messy is that they interviewed a family who crunched the numbers and figured it was a good business decision to simply walk away.
In fact, there is now a web site called You Walk Away. For $1k they file all the legal paperwork that allows you to walk away from your underwater home without the bank coming after any of your other assets.
Zifnab
And you know what? That’s fantastic. Nothing like a good exercise of personal responsibility to set the market right again. Got shafted with a shitty mortgage? Can’t make the payments now that your rates have doubled? Does renting seem like a fan-fucking-tastic idea right about now? Then pack your bags, kids, and get the fuck out of there. The banks created this mess. They can stew in it.
Jake
I pity da fool who forks over $1K for that service. They’d be better off hoping for the Ohio Sez FU Deutshe Banc solution.
But yeah, I’d heard about people dropping their houses like hot bricks but I thought it was very rare. The forclosure guy’s take on why it happens: The entire transaction is so anonymous (owner doesn’t know the bank, bank doesn’t know the owner) that they just don’t care, was close. I think people just think things couldn’t possibly get any worse so they just say fuck it and dump what seems to be the biggest problem in their lives: The house.
Walker
The issue is whether the state is a recourse state or not. Recourse loans allow the bank to go after your other assets. The state of California (which is where that website is active) is a non-recourse state. No original mortgage loan is recourse, so the homeowner can walk away. The word on the street is that there are signs of it becoming very prevalent in California.
With that said, don’t take what I am saying as advice. This is merely an observation. Also be aware that 2nd Mortgages, refinances, and HELOCs are all recourse and cannot be so easily walked away from.
Jon H
Time for a novelty song: ‘Take this house and shove it, I ain’t payin’ you no more.’
Haltelcere
First off, who says the Market is inefficient? Looks like someone is filling a sorely needed capitalistic niche!
Second off, an uncle of mine was living in Houston during the oil bust in the ’80’s. He said that it wasn’t uncommon for people to call the bank saying they were leaving town and had left the house keys in their mailboxes.
Jon H
“But yeah, I’d heard about people dropping their houses like hot bricks but I thought it was very rare.”
There has been a stigma, like filing for bankruptcy.
But people are starting to adopt business ethics. Dump non-performing assets for the good of the ‘stockholders’.
I think business has been able to use peoples’ moral sense against them for quite a long time, counting on people to do things that are not strictly in their interest rather than doing the coldly rational thing which carries some stigma but is perfectly rational.
The Other Steve
I’m actually surprised Countrywide’s loss wasn’t far worse.
Jon H
What kills me about the housing bubble is thinking what the carbon emissions equivalent were be for the construction of all those surplus houses and the commercial real estate built to serve the tracts of empty homes.
At least the internet bubble only produced a surplus of Aeron chairs.
Walker
I don’t like reading Mish much these days, because his posts are too apocalyptic sounding even to a bear like me. But he did have a good post on this matter today.
The issue is as follows: Corporations have all of the rights and privileges of a normal human being yet we never hold them to a code of ethics. Indeed, any attempt to hold them to ethical considerations (e.g. the environment, financial externalities on the community) is seen as “anti-business”. All that matters is whether or not it is legal.
Why then should people be treated any differently?
DougJ
How come we never hear the good news about the economy? What about all the people who aren’t defaulting on their loans and being evicted from their homes? What about all the companies that didn’t lose billions of dollars last quarter?
Darkness
You know, this heartens me in one darkly evil corner of my soul, actually. The contract to the homebuyers was a bait and switch scam in many of this cases, so there is no reason for the homeowner to stick honestly on their side of a bad contract. Someone pushes down on one side of the scale, and now someone is helping the homeowner (aka little guy) push down on the other. Balances out. Snapshot it and mandate that every lender hang that site on every loan officer’s wall for the next fifty years. (On the other hand, many of these people were dipshits and speculators and they’re probably the ones who will make the best of this when they don’t deserve to.)
Yeah, that.
Haltelcere
Because my 401K value is based on people not defaulting on their home loans and companies not losing billions of dollars. And my spouse’s income is based on people spending money.
But because so many people are defaulting on their home loans and companies are losing billions of dollars my 401K is being hit. And the value of my home is dropping (though the assessed tax value remains the same). And my spouse will probably see a reduction in income for 2008.
Jake
Hurrah! The Republican Bidness Model is thriving!
Less snarkily, I agree there is a stigma but when all of your neighbors are in the same boat (because some corporation got greedy) the stigma rapidly decreases.
Emma Anne
Calcualted Risk is excellent on these matters. Walking away *has* been rare – but the banks fear it is about to get quite common.
ET
And the news today was so great. CNN reports that foreclosures were up 75% for the year and homeownership in the fourth quarter of 2007 saw biggest one-year drop in since tracking began in 1965.
Jon H
This really serves the banks right, after years of their ‘we can change the terms of your credit card agreement at will without notice and jack up your fees and interest rate to astronomical levels because we heard you didn’t tip a waitress at the Denny’s in Sheboygan’ bullshit.
Darkness
Good news, the oil refining industry has never been healthier.
Oh, except this week it’s taken a hit. It always has been the poor cousin of the oil industry, strange that.
Corn growers are going whole hog. Okay, admittedly on the government teat, but still. All farmers are doing better as a result of the upward price pressures caused by ethanol. Now if we could just cut the farm subsidies at the same time…
Tourism is going gangbusters, especially in NY and Hawai’i. Foreigners are coming and spending their powerful currencies here. That’s one way to get our dollars back, by luring them to Vegas. I knew Vegas would do some good eventually.
The green industry is doing well, but do we care if the dirty hippies succeed? Oh, wait, that was the Eighties, right, bribe the hippies into becoming Republican…
Chuck Butcher
Since I’m in construction, new, remodel, repair none of this bodes well for me. New stuff hurts me, but the killer part is remodel and repair since that stuff depends on re-fi’s and stock accts, and a reliable job.
There are a couple things I can sell, but I’ll take a hurtin’ on them. The loss on my 62 Chevy II versus one year ago would really hurt, especially since I don’t want to sell it anyhow.
jcricket
My wife’s in the same boat (mainly remodel, actually). So it’s good that I have a non-construction job (in a fairly recession-resistant industry). In fact, one of the reasons we both switched jobs a while back was to diversify our income streams.
Sure, no one is “depression-proof”, but the fact that we’re both not in the same industry and not subject to the same boom/bust cycles at least helps make the lean times a little less lean. But I will say that it sucks to always have to think this way.
It’s not good for the long-term finances to have one of us lose his/her job every couple of years (or go through dramatic income losses). And we’re in better shape than most (6 months short-term savings, max the 401k/IRA when we’re employed, college funds for the kids, own a house that’s within our means, no credit card debt).
I don’t know how anyone who’s not upper middle class even thinks about anything other than “today”.
LiberalTarian
Yay. I’m going to get to buy a house someday. Can’t really sleep in my student loans, although they do keep me warm at night.
jcricket
Is that b/c you’re burning them in the trash can near where you sleep now? I kid.
Grover Gardner
I’m somewhat with Darkness, actually. But this “walk away” business is true. My neighbors were in a horrible fix over losing their home (ARM, house value fell below loan value so NO re-fi as assured two years ago), but then they went to a lawyer and got the straight dope. End result: they are (relatively) happy again and have stopped fighting over the issue. STOP making payments, STOP using credit cards except for home improvement items (new appliances, anyone?), DON’T get a a new job or increase your income, sit tight for a year and then plan on renting new home for half the price. Yes, they’re sad about losing their home, but they can rent a house down the street for half as much. Not a bad deal.