I'm going to start referring to Countrywide as "Mitch & Murray."

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I'm a guy in a Reagan mask -- and I'm running for President!

Damn, that's unconscionable (sp?)

We had a loan with them several years ago, when the bank we originally got the mortgage from sold it to them. We never had any of those kinds of problems.

Didn't have much luck trying to deal with them the next time around after moving back up here. I guess a lot changed over the years.

(The last guy we tried to deal with was reminiscent of Ricky Roma, only not as slick and not nearly as good looking.)

It's very much like Enron, which for most of its life was a stolid, solid energy company and suddenly decides to get into the magical pony producing bidness. From the NYT story:

One former employee provided documents indicating Countrywide’s minimum profit margins on subprime loans of different sizes. These ranged from 5 percent on small loans of $100,000 to $200,000 to 3 percent on loans of $350,000 to $500,000. But on subprime loans that imposed heavy burdens on borrowers, like high prepayment penalties that persisted for three years, Countrywide’s margins could reach 15 percent of the loan, the former employee said.

Regulatory filings show how much more profitable subprime loans are for Countrywide than higher-quality prime loans. Last year, for example, the profit margins Countrywide generated on subprime loans that it sold to investors were 1.84 percent, versus 1.07 percent on prime loans. A year earlier, when the subprime machine was really cranking, sales of these mortgages produced profits of 2 percent, versus 0.82 percent from prime mortgages. And in 2004, subprime loans produced gains of 3.64 percent, versus 0.93 percent for prime loans.

One reason these loans were so lucrative for Countrywide is that investors who bought securities backed by the mortgages were willing to pay more for loans with prepayment penalties and those whose interest rates were going to reset at higher levels. Investors ponied up because pools of subprime loans were likely to generate a larger cash flow than prime loans that carried lower fixed rates.

And like Enron, most people thought these idiots were "reinventing" business, when in fact they were engaging in the same old three-card monty. One would think that investors would have been put off by a business model that essentially boils down to "We're going to make huge profits by charging our poorest clients luxury prices!"

If I recall correctly, Morningstar recommended Coutrywide a couple of weeks ago on the day after subprimes crashed the stock market, saying that they were in better shape and poised to take advantage of the shakeout. That recommendation has since disappeared, or maybe I just dreamed I saw it.

"We're going to make huge profits by charging our poorest clients luxury prices!"

This has been my pet peeve about the mortgage industry. Charge the highest prices to those who can afford it the least. While these borrwers might have a fighting chance of making a mortage payment at a reasonable rate (in Tennessee, not on the coasts) the idea that they can afford the inflated rates is ludicrus. These loans are doomed to fail from the get go. Yet investors were flocking to buy them???

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Less is the new More - Karrie Jacobs