As Expected, Mozilo Kool-Aid Flows

by Florida's #1 Mortgage Planner on January 9, 2008

Kool-Aid Flowing at Countrywide As I had expected, I came across an article of how Countrywide denies the rumors of bankruptcy.  In this NY Times article, Countrywide said there was “no substance to the rumor that Countrywide is planning to file for bankruptcy, and we are not aware of any basis for the rumor that any of the major rating agencies are contemplating negative action relative to the company.”

Yet, if the litigation they are facing goes against them (previous post), bankruptcy will almost decidedly occur.  So, the statement above is very questionable as there is some substance to the rumors.

Now, add to that the fact that Countrywide saw delinquencies rise in December and even more substance is shown.  So, the Kool-Aid flows at the corporate level as they try to bail out their sinking ship.

Here are some of the excerpts from Wall Street Journal Online that came out as I was writing this post…

Countrywide’s loan delinquency rate surged to 7.2% of unpaid principal balances from 4.6% a year earlier and 6.52% in November.

No substance to the rumors, right?

Countrywide and E*Trade Financial Corp., both of which have been hit hard by the credit crunch, are offering some of the industry’s highest rates on products like certificates of deposit.

A very good sign that both companies are struggling and desperately are seeking any "liquidity" gains they can get.

Egan Jones, a ratings company, wrote in a report on Tuesday that Countrywide is "severely challenged and might falter if it does not receive an infusion of at least $4 billion within the next couple of weeks." It said funding is needed because of a 40% decline in mortgage originations at the savings-bank company and a shift away from formerly profitable subprime-mortgage loans.

Again, more substance and proof that the rumor mill may in fact not be a rumor at all.

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