Tuesday, January 29, 2008

Countrywide takes impairment

You've probably already read about Countrywide's large loss: $422 Million or 79 cents a share (more than double the predicted loss). But what struck me as I was reading this article is the HUGE impairment they're taking for holding unsellable Jumbo loans into their investment pool: edit/correction $394 Million on $7billion in loans.
Countrywide's loan fundings in the quarter totaled $69 billion, down from $124 billion in the prior-year period.

I wish the article had gone more into the impairment. That will have a large impact in all of the jumbo markets. I still believe during the darkest days of this downturn 25% down payments will be required. Believe it or not, BofA still has a zero down full doc "Doctor's loan" to $1M for professionals that have recently seen a large jump in their income.

That alone says it all. Mortgages are down 50% YOY and declining. You cannot have that large of an 'impairment' on Jumbo loans and expect banks to keep funding Jumbo loans on the old terms.

Countrywide has cut about 11,000 employees from its payrolls since July, the company said.
Ouch. And they're not done. There will be more job losses in the REIC this year than last. Yet somehow home prices are supposed to rebound?

2008 will be interesting

Think about all the 'profit' they took in 'unrealized gains' during 2006/2007 on neg-Am loans. That 'profit' is about to disapear.

Got popcorn?

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