Bank of America Home Loans

Last updated

Bank of America Home Loans
Company type Division of Bank of America
FoundedMarch 14, 1969 (Countrywide)
April 2009 (Bank of America Home Loans) [1]
Headquarters Calabasas, California, USA (Countrywide Financial)
Charlotte, North Carolina, USA (Bank of America)
Key people
 Barbara J. Desoer, President of Bank of America Home Loans and Insurance
Revenue$6,061,437,000 US$ (2007)
Decrease2.svg$1,310,274,000 US$ (2007)
Decrease2.svg$703,538,000 US$ (2007)
Parent Bank of America
Website Bank of America Home Loans

Bank of America Home Loans is the mortgage unit of Bank of America. It previously existed as an independent company called Countrywide Financial from 1969 to 2008. In 2008, Bank of America purchased the failing Countrywide Financial for $4.1 billion. In 2006, Countrywide financed 20% of all mortgages in the United States, at a value of about 3.5% of the United States GDP, a proportion greater than any other single mortgage lender. [2]

Contents

History

Countrywide was founded in 1969 by David S. Loeb and Angelo Mozilo. Loeb died in 2003. [3] The initial public offering was less than successful, with company stock trading over the counter at less than $1 per share. In 1985 Countrywide stock was re-listed on the New York Stock Exchange under the ticker symbol CFC.

Countrywide's stock has been described as the "23,000% stock" by Fortune magazine. Between 1982 and 2003, Countrywide delivered investors a 23,000.0% return, exceeding the returns of Washington Mutual, Walmart, and Warren Buffett's Berkshire Hathaway. [4]

On January 11, 2008, Bank of America announced that it planned to purchase Countrywide Financial for $4.1 billion in stock. On June 5, 2008, Bank of America Corporation announced it had received approval from the Board of Governors of the Federal Reserve System to purchase Countrywide Financial Corporation. Then, on June 25, 2008, Countrywide announced it had received the approval of 69% of its shareholders to the planned merger with Bank of America. Finally, on July 1, 2008, Bank of America Corporation completed its purchase of Countrywide Financial Corporation. In 1997, Countrywide spun off Countrywide Mortgage Investment as an independent company called IndyMac Bank. [5] Federal regulators seized IndyMac on July 11, 2008, after a week-long bank run. [6] [7] [8]

Businesses

Bank of America Home Loans is composed of:

Mortgage banking

The Mortgage Banking segment produces mortgage loans through various channels on a national scale. Nearly all the mortgage loans the company produces in this segment are sold into the secondary market, mainly in mortgage-backed securities. In 2006, 45% of those mortgages were conventional non-conforming loans, loans too large to sell to Fannie Mae. [3] The company generally performs the ongoing servicing functions related to the mortgage loans that it produces. It also provides various loan closing services, such as title, escrow, and appraisal.

The Mortgage Banking segment comprises three distinct sectors: Loan Production, Loan servicing, and Loan Closing Services.

Loan production

The role of Loan Production is to originate and fund new loans and to acquire already-funded loans through purchases from other lenders. Loan Production produces mortgage loans through four divisions of Countrywide Home Loans: Consumer Markets, Full Spectrum Lending, Wholesale Lending, and Correspondent Lending.

Consumer Markets and Full Spectrum Lending offer loans directly to consumers. Loans produced by these two retail divisions are originated, funded, and sold by Countrywide. Consumer Markets offers various products, whereas Full Spectrum Lending focuses primarily on products appropriate for customers with less than prime-quality credit.

Wholesale Lending offers loans to consumers whose loans are originated by another mortgage broker. These loans are funded and sold by Countrywide but originated by other lenders.

Correspondent Lending purchases mortgage loans from other lenders, which include mortgage bankers, commercial banks, savings and loan associations, home builders, and credit unions. These loans may be sold by Countrywide to end-investors on the secondary market but are originated and funded by other lenders.

Loan servicing

Loan servicing services loans, i.e., collect payments from the borrower, handles escrow accounts, tax and insurance payments (if applicable), then remit "advances" to the investor's trustee as specified in the Pooling and Servicing Agreement (PSA).

Loan servicing typically retains a fraction of the payment made (normally 25 – 75 basis points of the unpaid principal balance) as a "servicing fee".

Loan servicing also generates income in the form of interest on monies received and held before paying scheduled advances to the trustee, fees charged for late payments, force-placed insurance, document requests, legal fees, payoff statements, etc.

Loan closing services

LandSafe and its subsidiaries offer loan closing services, including real estate appraisal services, automated credit reporting products, flood determination services, and residential title services for the six major counties of Southern California.

Banking

The Banking segment consisted of Countrywide Bank, FSB, and Countrywide Warehouse Lending. Formerly, the bank was known as Countrywide Bank, N.A.. This nationally chartered bank was regulated jointly by the Office of the Comptroller of the Currency and the Federal Reserve. Still, it converted its charter to a federally chartered thrift that is regulated by the Office of Thrift Supervision. [9] [10] Countrywide Bank is the 3rd largest Savings and Loan institution and is the fastest-growing bank in United States history. Assets from deposits are currently approaching $125 billion.

Countrywide Bank primarily originates and purchases mortgage loans and home equity lines of credit for investment purposes. Most of these loans are sourced through its mortgage banking subsidiary, Countrywide Home Loans. In addition, the Bank obtains retail deposits, primarily certificates of deposit, through the Internet, call centers, and more than 200 financial centers, many of which were located in Countrywide Home Loans' retail branch offices as of April 1, 2007.

Countrywide Warehouse Lending provides warehouse lines of credit to mortgage bankers, who use these funds to originate loans. These mortgage bankers are primarily customers of Countrywide Home Loans' Correspondent Lending division and the Capital Markets divisions; the mortgage bankers use warehouse lines of credit from Countrywide Warehouse Lending to help originate loans, then sell those loans to Countrywide through Correspondent Lending or Capital Markets.

Capital markets

The Capital Markets segment primarily operates as a registered securities broker-dealer, a residential mortgage loan manager, and a commercial mortgage loan originator. CFC also operates broker-dealers in Japan and the United Kingdom, an introducing broker-dealer of futures contracts, an asset manager, and a broker of mortgage servicing rights. Except its commercial mortgage activities, the company transacts only with institutional customers, such as banks, other depository institutions, insurance companies, asset managers, mutual funds, pension plans, other broker-dealers and governmental agencies. Customers of its commercial real estate finance business are the owners or sponsors of commercial properties, who can be individuals or institutions.

Countrywide Asset Management Corporation manages the acquisition and disposition of loans from third parties and loans originated by Countrywide Home Loans on behalf of Countrywide Home Loans. These are typically delinquent or otherwise illiquid residential mortgage loans, which have primarily originated under Federal Housing Administration (FHA) and Veterans Administration (VA) programs. The Company attempts to rehabilitate the loans, using the servicing operations of Countrywide Home Loans, to securitize those loans that become eligible for securitization. The remaining loans are serviced through foreclosure and liquidation, including collecting government insurance and guarantee proceeds relating to defaulted FHA and VA program loans.

Securities trading activities include trading debt securities in the secondary market after the original issuance of the security. Underwriting activities encompass the assumption of the risk of buying a new issue of securities from the issuer and reselling the securities to investors, either directly or through dealers. Capital Markets primarily underwrites mortgage-related debt securities.

Insurance

The Insurance segment activities include offering property, casualty, life, and credit insurance as an underwriter and as an insurance agency and providing reinsurance coverage to primary mortgage insurers through two business units: Balboa Life and Casualty Operations, and Balboa Reinsurance Company.

Balboa Life and Casualty Group underwrite property, casualty, life, and credit insurance in all 50 states. Its products include Lender-Placed Property and Auto, which includes lender-placed auto insurance and lender-placed, real-property hazard insurance; Voluntary Homeowners and Auto, which underwrites retail homeowners insurance and home warranty plans for consumers; and Life and Credit, which underwrites term life, credit life, and credit disability insurance products.

Balboa Reinsurance Company provides a mezzanine layer of reinsurance coverage for losses between minimum and maximum specified amounts to the insurance companies that provide private mortgage insurance (PMI) on loans in its servicing portfolio. It provides this coverage concerning substantially all of the loans in the Company's portfolio that are covered by PMI, which generally includes all conventional loans with an original loan amount over 80% of the property's appraised value. It earns a portion of the PMI premiums in return for providing this coverage.

Global operations

The primary activities of the Global Operations segment was Global Home Loans (GHL): a UK third-party administrator (TPA) formed out of a joint venture between Countrywide and Woolwich plc in 1998. Activities included Loan Processing and subservicing, providing mortgage loan application processing, and mortgage loan subservicing in the United Kingdom.

Following the acquisition of Woolwich by Barclays plc, this relationship developed further, with GHL acquiring the Barclays mortgage portfolio through a transfer of ownership of the Barclays mortgage operation in Leeds to GHL in 2003.

By 2005, GHL operation processed more than £11.3 billion ($20.3 billion) in loans, all of which are subserviced for Barclays, PLC, the joint venture partner. As of December 31, 2005, Global's subservicing portfolio was £59 billion ($102 billion).

In November 2005, Barclays announced that it intended to terminate the third party administration arrangement with GHL and bring the mortgage originations and servicing operations back in-house. This resulted in Countrywide buying out Barclays' remaining 30% stake in GHL. Barclays brought the operation back in-house in February 2006.

Since then Global's presence in the UK has been confined to providing support to Barclays and Prudential Assurance, who continue to use the proprietary originations, servicing and arrears processing systems developed for GHL and Countrywide by Countrywide Technology Group (CWTG).

A second venture in the UK, Valuation Services, provided one of the first electronic residential property valuation services to third parties in the United Kingdom through a majority-owned joint venture. This was sold to First American in 2007.

Offshore Services commenced operations in India in 2004. Set up to exploit the strategic advantage of employing systems specialists based in the sub-continent, it provides business process and technology services to the Parent Company and its subsidiaries in both the United States and the United Kingdom.

Controversies

Employee and contract labor issues

In 2003, Countrywide was the subject of a class-action lawsuit alleging overtime violations. Countrywide was charged with working employees 10–15 hours per day, 6 to 7 days per week without compensating them for overtime wages. The lawsuit was settled in May 2005, with the payment of $30 million in compensation to 400 account executives. [11] Additionally, Countrywide is one of many companies that conducts in-depth background searches of new employee applicants. The background search goes beyond typical employment, education, and criminal history searches, and enables a company to view the applicant's credit, and public record documents such as lawsuits and divorce records. Although it must be authorized by the applicant, Countrywide explicitly does not consider applicants who deny authorization for a search. This policy has led to otherwise qualified applicant complaints and dispute filings which claim this policy is discriminatory, invasive, and compromises the applicant's privacy.

Countrywide maintains a policy of not filing the legally required Internal Revenue Service Form 1099 to independent brokers. [3] The validity of this is questionable however.

Minority and subprime borrowers

Countrywide agreed to a settlement with New York state attorney general Eliot Spitzer to compensate black and Hispanic borrowers improperly steered by Countrywide salespeople to higher-cost loans. The company also agreed to improve training and oversight of its loan officers and to pay New York state $200,000 to cover costs of the investigation. [12]

Countrywide subprime documents show a policy of lending to families with as little as $1000 of disposable income, often compromising their ability to pay living expenses.

Economist Stan Liebowitz writes that the Fannie Mae Foundation singled out Countrywide Financial as a "paragon" of a nondiscriminatory lender who works with community activists, following "the most flexible underwriting criteria permitted." The chief executive of Countrywide is said to have bragged that in order to approve minority applications, "lenders have had to stretch the rules a bit." Countrywide's commitment to low-income loans had grown to $600 billion by early 2003. [13]

Hurricanes Katrina, Gustav and Rita complaints

Some customers have complained that after the devastating hurricanes Katrina, Gustav and Rita, Countrywide told loan customers in the affected areas that they could take a break on payments without any late fees, and the payments would be added back to the end of the loan. They now contend that Countrywide forced the loan customers to pay the missed payments in a lump sum, along with late fees they were told they did not have to pay, within 30 days or face foreclosure. [14]

"Friends of Angelo" VIP program

In June 2008 Conde Nast Portfolio reported that numerous Washington D.C. politicians over recent years had received mortgage financing at noncompetitive rates because the corporation considered the officeholders "FOA's" — "Friends of Angelo" (Countrywide Chief Executive Angelo Mozilo). The politicians extended such favorable financing included the chairman of the Senate Banking Committee, Christopher Dodd, and the chairman of the Senate Budget Committee, Kent Conrad. The article also noted Countrywide's political action committee had made large donations to Dodd's campaign. [15] Senator Dodd proposed that the federal government buy up to $400 Billion in defaulted mortgages. [16] Citizens for Responsibility and Ethics in Washington (CREW) has called for House and Senate to investigate Senators Conrad and Dodd. [17]

It was reported that James Johnson, former CEO of Fannie Mae and an adviser to presidential candidate Barack Obama, had received loans under the "Friends of Angelo". [18] Johnson announced he would step down from the vice-presidential vetting position on June 11, 2008, in order to avoid being a distraction to Obama's campaign.

In June 2008 The Wall Street Journal reported that Franklin Raines, a former CEO of Fannie Mae, received below market rates loans at Countrywide Financial because the corporation also considered him an "FOA". He received loans for over $3 million while CEO of Fannie Mae. [19] On July 16, 2008, The Washington Post reported that Franklin Raines had "taken calls from Barack Obama's presidential campaign seeking his advice on mortgage and housing policy matters." [20] Subsequent attempts to connect Obama's campaign with Franklin Raines were characterized by The Washington Post as "a stretch". [21]

Lawsuits

The office of Attorney General of Illinois, Lisa Madigan, filed a civil lawsuit in Cook County Circuit Court against Countrywide Financial Corporation on June 25, 2008. The lawsuit cites information gathered from documents obtained via a subpoena in the fall of 2007. Madigan's office claims the "mortgage lender engaged in "unfair and deceptive" practices to get homeowners to apply for risky mortgages far beyond their means." [22] [23]

California Attorney General, Jerry Brown, followed suit by filing a similar lawsuit on June 25, 2008, accusing the lender of breaking the state's laws against false advertising and unfair business practices. The lawsuit also claims the defendant mislead many consumers by misinforming them about the workings of certain mortgages such adjustable-rate mortgages, interest-only loans, low-documentation loans and home-equity loans while telling borrowers they would be able to refinance before the interest rate on their loans adjusted. [24]

In August 2008, Connecticut Attorney General Richard Blumenthal also brought suit against Countrywide, alleging that deceptive lending practices had ripped off Connecticut homeowners.[ permanent dead link ]

The suit was settled in October 2008 after Bank of America acquired Countrywide. The settlement involves the modifying of troubled 'predatory loans' up to $8.4 billion. The states currently involved in the settlement are Arizona, California, Connecticut, Florida, Iowa, Michigan, North Carolina, Ohio, Texas, and Washington. Other states may also join the settlement. [25]

There is also a shareholder class action lawsuit for investors in asset-backed securities from Countrywide. [26]

Subprime mortgage crisis

Secondary market disruption

When Countrywide finances mortgage loans, they usually packaged them for sale to large investors as mortgage-backed securities. Fannie Mae or Freddie Mac can only buy loans which conform to the standards of government-sponsored enterprises. Non-conforming mortgages securities must be sold in the private, secondary market to alternative investors. On August 3, 2007, this secondary market essentially stopped trading most of the non-conforming securities. Secondary mortgage market disruptions had happened previously, but, the new disruption appeared more serious, both larger in range and likely duration. Alt-A mortgages (loans given to apparently creditworthy borrowers without much or any documentation) completely stopped at ratings lower than AAA. Difficulties extended to much of AAA-rated mortgage-backed securities. Only securities with conforming mortgages were trading. Countrywide Financial issued a statement that its mortgage business has access to a nearly $50 billion funding cushion. [27]

After the collapse of American Home Mortgage on August 6, 2007, attention returned to Countrywide Financial which at the time had issued about 17% of all mortgages in the United States. Only days later, Countrywide Financial disclosed to the U.S. Securities and Exchange Commission (SEC) that these disruptions in the secondary mortgage markets could hurt it financially:

Since the company is highly dependent on the availability of credit to finance its operations, disruptions in the debt markets or a reduction in our credit ratings could have an adverse impact on our earnings and financial condition, particularly in the short term… Current conditions in the debt markets include reduced liquidity and increased credit risk premiums for certain market participants. These conditions, which increase the cost and reduce the availability of debt, may continue or worsen in the future…. There can be no assurance, however, that the Company will be successful in these efforts, that such facilities will be adequate or that the cost of debt will allow us to operate at profitable levels.

This raised speculation that Countrywide was a potential bankruptcy risk. [28] [29] On August 10, a run on the bank began as the secondary mortgage market shut down, curtailing new mortgage funding. [30]

The perceived risk of Countrywide bonds rose. Fitch, Moody's and Standard & Poor's credit ratings agencies downgraded Countrywide 1 or 2 grades, some to near junk status. The cost of insuring its bonds rose 22% overnight. This also limited its access to commercial paper. Some institutional investors admitted trying to sell Countrywide paper. [31] Fifty other mortgage lenders had already filed for Chapter 11 bankruptcy, and Countrywide Financial was cited as a possible bankruptcy risk by Merrill Lynch and others on August 15. This combined with news that its ability to issue new commercial paper might be severely hampered put severe pressure on the stock. Its shares fell $3.17 to $21.29, which was its biggest fall in a single day since the crash of 1987 – the shares had fallen 50% so far that year. [32] On August 15, 2007, Merrill Lynch advised its clients to sell their stock in Countrywide.

Announcement of problems and bailouts

On Thursday, August 16, 2007, the company expressed concerns over liquidity because of the decline of the secondary market for securitized mortgage obligations. Countrywide also announced its intent to draw on the entire $11.5 billion credit line from a group of 40 banks including JPMorgan Chase. [33] On Friday August 17, many depositors sought to withdraw their bank accounts. [34] Countrywide also planned to make 90% of its loans conforming. [35] By this point stock shares had lost about 75% of their peak value and speculation of bankruptcy broadened. [36] [37] [38] At the same time the Federal Reserve Bank lowered the discount rate 0.5% in a last-minute, early morning conference call. The Fed accepted about $17.2 billion in repurchase agreements for mortgage backed securities to aid in liquidity. This also helped calm the stock market and investors promptly responded positively with the Dow posting gains. [39]

Additionally, the firm was forced to restate income it had claimed from accrued but unpaid interest on "exotic" mortgages where the initial pay rate was less than the amortization rate. In 2007 it became apparent much of this interest had become uncollectable. [40]

In a letter dated August 20, Federal Reserve agreed to waive banking regulations at the request of Citigroup and Bank of America. The Fed agreed to exempt both banks from rules that limited the amount that federally insured banks can lend to related brokerage companies to 10% of bank capital. [41] Until then, banking regulation was that banks with federally insured deposits should not be put at risk by brokerage subsidiaries' activities. [42] On August 23, Citibank and Bank of America said that they and two other banks accessed $500 million in 30-day financing at the Fed's discount window. The same day, Countrywide Financial obtained $2 billion of new capital from Bank of America Corp. For this the Bank of America brokerage arm would get convertible preferred stock. [43] [44]

On November 26, 2007, Countrywide stock was hammered on the NYSE, dropping over 10% to a level of $8.64/share; less than half the share's value in August when the firm faced bankruptcy rumors and a fraction of its value in 2006. [45] One proximate cause was reports that the Atlanta Federal Home Loan Bank had extended a large amount of its credit to Countrywide to offset its inability to raise funds in the private market. Senator Chuck Schumer called for an investigation as to the prudence of the FHLBB's action in this regard. [46]

From 2005 to 2007, Angelo R. Mozilo sold much of his CFC stock realizing $291.5 million in profits. [3] [47] A class action suit was filed on behalf of shareholders alleging securities violations.

In September 2008, Countrywide sent letters to its mortgage customers to inform that one of their employees had stolen identity information that contained social security numbers and birth dates. Countrywide apologized in the letter and offered free credit monitoring for 90 days.

'Protect Our House' PR campaign

In September 2007, after months of negative publicity and the announcement of a reduction of 20% of its workforce, [48] Countrywide launched a public relations campaign aimed at demoralized employees. Employees were expected to sign a loyalty oath to "demonstrate their commitment to our efforts" and "to tell the Countrywide story to all". Those who signed the pledge received a green rubber Protect Our House wristband while according to the companies CFC those not signing would lose their jobs. [49]

Takeover

The endgame in Bank of America's $4 billion takeover of Countrywide Financial began with a December phone call from Countrywide Chief Executive Angelo Mozilo to his Bank of America counterpart, Kenneth D. Lewis. And on January 11, 2008, Bank of America announced it had agreed to buy Countrywide for $4 billion in an all-stock transaction. [50] The stock's value settled at about $5½ per share following the announcement; it had been as low as $4.43 before the Bank of America deal was announced. Bank of America Corp finally acquired Countrywide in 2008 for $2.5 billion. [51] [52]

After more than six months of financial deterioration at Countrywide—despite a $2 billion infusion of cash from Bank of America in August—Mozilo said he was ready to throw in the towel, according to Lewis.

At the same time, having watched Countrywide dramatically retool its operations in a bid to survive, Bank of America executives began to believe Countrywide's big U.S. mortgage business might be worth having.

The ability to get that kind of size and scale became more appealing as we saw the business model change to a model we could accept," Lewis said. "We considered the lawsuits, the negative publicity that Countrywide had. We weighed the short-term pain versus what we think will be a very good deal for our shareholders.

Bank of America deployed 60 analysts from its headquarters in Charlotte, N.C., to Countrywide's headquarters in Calabasas, Calif. After four weeks analyzing Countrywide's legal and financial predicament, and modeling how its loan portfolio was likely to perform, Bank of America offered an all-stock deal valued at $4 billion for Countrywide—a fraction of the company's $24 billion market value a year ago. [53] Countrywide shareholders approved the deal on June 25, 2008, [54] and it closed July 2, 2008. [55] Bank of America announced on June 26, 2008, that the takeover of Countrywide Financial Corp. will result in the loss of 7,500 jobs over the next two years. [56]

The deal was a landmark in the housing crisis, given Countrywide's prominence as the nation's largest mortgage lender, at the time. [57] It was to prove more costly to Bank of America, however, than was perceived at the time: in August 2014, Bank of America was forced to agree to a near-$17 billion deal to settle claims against it relating to the sale of toxic mortgage-linked securities, a large percentage of which had been sold by Countrywide. [58]

SEC charges

On June 4, 2009, the U.S. Securities and Exchange Commission charged former CEO Angelo Mozilo with insider trading and securities fraud, and former COO David Sambol and former CFO Eric Sieracki with securities fraud for failing to disclose Countrywide's lax lending standards in Countrywide's 2006 annual report. [59] [60] Despite these charges, Countrywide, and then its successor Bank of America, were awarded the Property Management contract with the Veterans Administration. A July 22, 2008, memo from Judith Caden, VA Director of Loan Guaranty Service issued this proclamation in Circular 26-08-10. Bank of America still retained this position with VA until 2011.

See also

Related Research Articles

<span class="mw-page-title-main">Fannie Mae</span> Government-backed financial services company

The Federal National Mortgage Association (FNMA), commonly known as Fannie Mae, is a United States government-sponsored enterprise (GSE) and, since 1968, a publicly traded company. Founded in 1938 during the Great Depression as part of the New Deal, the corporation's purpose is to expand the secondary mortgage market by securitizing mortgage loans in the form of mortgage-backed securities (MBS), allowing lenders to reinvest their assets into more lending and in effect increasing the number of lenders in the mortgage market by reducing the reliance on locally based savings and loan associations. Its brother organization is the Federal Home Loan Mortgage Corporation (FHLMC), better known as Freddie Mac.

<span class="mw-page-title-main">Bank of America</span> American multinational banking and financial services corporation

The Bank of America Corporation is an American multinational investment bank and financial services holding company headquartered at the Bank of America Corporate Center in Charlotte, North Carolina, with investment banking and auxiliary headquarters in Manhattan. The bank was founded by the merger of NationsBank and Bank of America in 1998. It is the second-largest banking institution in the United States and the second-largest bank in the world by market capitalization, both after JPMorgan Chase. Bank of America is one of the Big Four banking institutions of the United States. It serves about 10 percent of all American bank deposits, in direct competition with JPMorgan Chase, Citigroup, and Wells Fargo. Its primary financial services revolve around commercial banking, wealth management, and investment banking.

<span class="mw-page-title-main">Financial services</span> Economic service provided by the finance industry

Financial services are economic services tied to finance provided by financial institutions. Financial services encompass a broad range of service sector activities, especially as concerns financial management and consumer finance.

<span class="mw-page-title-main">Community Reinvestment Act</span> US federal law

The Community Reinvestment Act is a United States federal law designed to encourage commercial banks and savings associations to help meet the needs of borrowers in all segments of their communities, including low- and moderate-income neighborhoods. Congress passed the Act in 1977 to reduce discriminatory credit practices against low-income neighborhoods, a practice known as redlining.

<span class="mw-page-title-main">Franklin Raines</span> American businessman and federal executive

Franklin Delano Raines, also known as Frank Raines, is an American business executive. He is the former chairman and chief executive officer of the Federal National Mortgage Association, commonly known as Fannie Mae, who served as White House budget director under President Bill Clinton. His role leading Fannie Mae has come under scrutiny. He has been called one of the "25 People to Blame for the Financial Crisis" according to Time magazine.

New Century Financial Corporation was a real estate investment trust that originated mortgage loans in the United States through its operating subsidiaries, New Century Mortgage Corporation and Home123 Corporation.

IndyMac, a contraction of Independent National Mortgage Corporation, was an American bank based in California that failed in 2008 and was seized by the United States Federal Deposit Insurance Corporation (FDIC).

<span class="mw-page-title-main">Subprime mortgage crisis</span> 2007 mortgage crisis in the United States

The American subprime mortgage crisis was a multinational financial crisis that occurred between 2007 and 2010 that contributed to the 2007–2008 global financial crisis. The crisis led to a severe economic recession, with millions losing their jobs and many businesses going bankrupt. The U.S. government intervened with a series of measures to stabilize the financial system, including the Troubled Asset Relief Program (TARP) and the American Recovery and Reinvestment Act (ARRA).

<span class="mw-page-title-main">Angelo Mozilo</span> American banker (1938–2023)

Angelo Robert Mozilo was an Italian American mortgage industry banker who was co-founder, chairman of the board, and chief executive officer of mortgage giant Countrywide Financial until July 1, 2008. Mozilo retired shortly after the sale to Bank of America for a total of $4.1 billion in stock. The company's status as a major lender of subprime mortgages made it a central player in a subsequent mortgage crisis which collapsed the industry, bursting a housing bubble which had accumulated throughout the 2000s, and contributing heavily to the Great Recession. Mozilo later paid over $67 million in fines to settle a series of federal charges related to his conduct at the company. While Mozilo is often mentioned in connection with the 2008 housing crisis, he remains highly regarded among many mortgage and housing industry leaders and insiders.

The subprime mortgage crisis impact timeline lists dates relevant to the creation of a United States housing bubble and the 2005 housing bubble burst and the subprime mortgage crisis which developed during 2007 and 2008. It includes United States enactment of government laws and regulations, as well as public and private actions which affected the housing industry and related banking and investment activity. It also notes details of important incidents in the United States, such as bankruptcies and takeovers, and information and statistics about relevant trends. For more information on reverberations of this crisis throughout the global financial system see 2007–2008 financial crisis.

<span class="mw-page-title-main">Timeline of the 2000s United States housing bubble</span>

Housing prices peaked in early 2005, began declining in 2006.

<span class="mw-page-title-main">Federal takeover of Fannie Mae and Freddie Mac</span> Action by the U.S. Treasury to lessen the subprime mortgage crisis

In September 2008, the Federal Housing Finance Agency (FHFA) announced that it would take over the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation. Both government-sponsored enterprises, which finance home mortgages in the United States by issuing bonds, had become illiquid as the market for those bonds collapsed in the subprime mortgage crisis. The FHFA established conservatorships in which each enterprise's management works under the FHFA's direction to reduce losses and to develop a new operating structure that will allow a return to self-management.

This article provides background information regarding the subprime mortgage crisis. It discusses subprime lending, foreclosures, risk types, and mechanisms through which various entities involved were affected by the crisis.

Regulatory responses to the subprime crisis addresses various actions taken by governments around the world to address the effects of the subprime mortgage crisis.

A toxic asset is a financial asset that has fallen in value significantly and for which there is no longer a functioning market. Such assets cannot be sold at a price satisfactory to the holder. Because assets are offset against liabilities and frequently leveraged, this decline in price may be quite dangerous to the holder. The term became common during the financial crisis of 2007–2008, in which they played a major role.

The government interventions during the subprime mortgage crisis were a response to the 2007–2009 subprime mortgage crisis and resulted in a variety of government bailouts that were implemented to stabilize the financial system during late 2007 and early 2008.

Government policies and the subprime mortgage crisis covers the United States government policies and its impact on the subprime mortgage crisis of 2007-2009. The U.S. subprime mortgage crisis was a set of events and conditions that led to the 2007–2008 financial crisis and subsequent recession. It was characterized by a rise in subprime mortgage delinquencies and foreclosures, and the resulting decline of securities backed by said mortgages. Several major financial institutions collapsed in September 2008, with significant disruption in the flow of credit to businesses and consumers and the onset of a severe global recession.

<span class="mw-page-title-main">Causes of the Great Recession</span>

Many factors directly and indirectly serve as the causes of the Great Recession that started in 2008 with the US subprime mortgage crisis. The major causes of the initial subprime mortgage crisis and the following recession include lax lending standards contributing to the real-estate bubbles that have since burst; U.S. government housing policies; and limited regulation of non-depository financial institutions. Once the recession began, various responses were attempted with different degrees of success. These included fiscal policies of governments; monetary policies of central banks; measures designed to help indebted consumers refinance their mortgage debt; and inconsistent approaches used by nations to bail out troubled banking industries and private bondholders, assuming private debt burdens or socializing losses.

<span class="mw-page-title-main">2007–2008 financial crisis</span> Worldwide economic crisis

The 2007–2008 financial crisis, or the global financial crisis (GFC), was the most severe worldwide economic crisis since the Great Depression. Predatory lending in the form of subprime mortgages targeting low-income homebuyers, excessive risk-taking by global financial institutions, a continuous buildup of toxic assets within banks, and the bursting of the United States housing bubble culminated in a "perfect storm", which led to the Great Recession.

PennyMac Financial Services, Inc. is an American residential mortgage company headquartered in Westlake Village, California. The company's business focuses on the production and servicing of U.S. mortgage loans and the management of investments related to the U.S. mortgage market. PennyMac operates through two subsidiaries: PennyMac Loan Services, LLC and PNMAC Capital Management, LLC. The latter manages the PennyMac Mortgage Investment Trust, a mortgage REIT.

References

  1. ↑ "UPDATE 3-Bank of America drops Countrywide name". Reuters. April 27, 2009. Retrieved July 25, 2023.
  2. ↑ Martin, Ray (May 9, 2012). "Bank of America's great mortgage give-away". www.cbsnews.com. Retrieved August 10, 2021.
  3. 1 2 3 4 Gretchen Morgenson (August 29, 2007). "Inside the Countrywide Lending Spree". New York Times. Retrieved August 29, 2007.
  4. ↑ Fortune, "Meet The 23,000% Stock", September 2003
  5. ↑ Paletta, Damian; Enrich, David (July 12, 2008). "Crisis Deepens as Big Bank Fails: IndyMac Seized In Largest Bust In Two Decades". Wall Street Journal.
  6. ↑ Story, Louise (July 12, 2008). "Regulators Seize Mortgage Lender". The New York Times. Retrieved April 26, 2010.
  7. ↑ US Lender IndyMac Collapses Archived July 5, 2009, at the Wayback Machine . Sky News. July 13, 2008.
  8. ↑ Lacter, Mark (July 11, 2008). "IndyMac taken over". LA Biz Observed. Archived from the original on July 14, 2008. Retrieved July 12, 2008.
  9. ↑ OTS Approves Countrywide Application
  10. ↑ TheStreet.com : Countrywide's Thrifty Move | Banks | CFC
  11. ↑ Countrywide to Settle Rosemead Call Center Employees Class Action
  12. ↑ "Home Lender to Repay Minority Buyers". The New York Times. December 6, 2006.
  13. ↑ Liebowitz, Stan (February 5, 2008). "The Real Scandal – How feds invited the mortgage mess". New York Post. Archived from the original on December 16, 2008. Retrieved September 30, 2008.
  14. ↑ The Blotter: A Deal Too Good To Be True?: Katrina Victims Say Mortgage Lender Misled Them
  15. ↑ Countrywide's Many 'Friends' Conde Nast Portfolio, June 12, 2008
  16. ↑ "Dodd Defends Housing Plan, Blasts Bush". The Wall Street Journal. May 7, 2008.
  17. ↑ https://news.yahoo.com/s/ap/20080613/ap_on_go_co/senators_vip_mortgages_4 [ dead link ]
  18. ↑ Simpson, Glenn R.; Hagerty, James R. (June 7, 2008). "Countrywide Friends Got Good Loans". The Wall Street Journal.
  19. ↑ Countrywide Friends Got Good Loans
  20. ↑ Huslin, Anita (July 16, 2008). "On the Outside Now, Watching Fannie Falter". The Washington Post. Retrieved April 26, 2010.
  21. ↑ "Linking Obama to Ex-Fannie Mae Chief Is a Stretch". The Washington Post. September 20, 2008. Retrieved April 26, 2010.
  22. ↑ "State's suit to target mortgage lender for unfair practices". Chicago Tribune. June 25, 2008. Retrieved June 25, 2008.[ permanent dead link ]
  23. ↑ "Illinois AG sues Countrywide over lending practices". Associated Press. June 25, 2008. Archived from the original on June 28, 2008. Retrieved June 25, 2008.
  24. ↑ "California sues Countrywide". CNN Money.com. June 25, 2008. Retrieved June 25, 2008.
  25. ↑ "BofA to pay $8 billion over subprime suit",'MSNBC', October 6, 2008
  26. ↑ Countrywide Mortgage-Backed Securities Certificate Investor Lawsuit. Shareholders Foundation.
  27. ↑ Alistair Barr (August 7, 2007). "Secondary Market Stalls Mortgage Lenders". Forbes . Associated Press . Retrieved August 26, 2007.[ dead link ]
  28. ↑ "Countrywide: Debt Market Woes Pose Risk". Forbes. Associated Press. August 9, 2007. Retrieved August 26, 2007.[ dead link ]
  29. ↑ Evelyn M. Rusli (August 9, 2007). "Credit Fears Chill Countrywide Financial". Forbes. Archived from the original on January 17, 2008. Retrieved August 26, 2007.
  30. ↑ "Countrywide, Washington Mutual Fall on Mortgage Slump (Update3)". Bloomberg. August 10, 2007. Retrieved August 29, 2007.
  31. ↑ "Countrywide Plunges on Downgrade". Forbes. Associated Press. August 15, 2007. Retrieved August 26, 2007.[ dead link ]
  32. ↑ "Top US lender 'risks bankruptcy'". BBC News. August 15, 2007. Retrieved August 16, 2007.
  33. ↑ SEC Accession No. 0000950148-07-000204, Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant, SEC, August 16, 2007
  34. ↑ "Countrywide Bank Reassure Clients". August 18, 2007.
  35. ↑ Evelyn M. Rusli (August 16, 2007). "Countrywide Breaks Into The Piggy Bank". Forbes. Archived from the original on January 17, 2008. Retrieved August 26, 2007.
  36. ↑ Liz Moyer (August 16, 2007). "Countrywide, Markets On The Ropes". Forbes. Archived from the original on November 21, 2008. Retrieved August 26, 2007.
  37. ↑ Liz Moyer (August 16, 2007). "Countrywide Is On Its Side". Forbes. Archived from the original on October 31, 2007. Retrieved August 26, 2007.
  38. ↑ Evelyn M. Rusli (August 16, 2007). "Countrywide Starving For Cash". Forbes. Archived from the original on December 17, 2007. Retrieved August 26, 2007.
  39. ↑ Temporary Open Market Operations Federal Reserve Bank of New York
  40. ↑ High-risk mortgages become toxic mess AP via yahoo
  41. ↑ Response to request for exemption to section 23A of Regulation W (pdf), Federal Reserve Bank Board of Governors.
  42. ↑ Peter Eavis (August 24, 2007). "Fed bends rules to help two big banks". Fortune . Retrieved August 26, 2007.
  43. ↑ Thomson Financial (August 23, 2007). "Euroshares higher midday, Dow seen up on Countrywide cash injection". Forbes. Archived from the original on August 25, 2007. Retrieved August 26, 2007.
  44. ↑ Gregory J. Wilcox (August 25, 2007). "$2 billion infusion lets Countrywide Financial buy time". Los Angeles Daily News . Retrieved August 26, 2007.[ dead link ]
  45. ↑ CFC: Basic Chart for COUNTRYWIDE FNL CP – Yahoo! Finance
  46. ↑ "Countrywide Falls as Schumer Seeks Probe of Advances (Update2)". Bloomberg. November 26, 2007.
  47. ↑ "Countrywide Financial Corp, Insider trades". New York Times.
  48. ↑ "Countrywide to lay off 20 percent of workforce" The Orange County Register , September 7, 2007
  49. ↑ "'Protect our house' is lender's new motto". The Wall Street Journal. October 4, 2007. Archived from the original on June 10, 2008.
  50. ↑ Ellis, David (January 11, 2008). "BofA to buy Countrywide for $4B". CNN Money . Archived from the original on January 13, 2008. Retrieved January 11, 2008.
  51. ↑ "Factbox: Countrywide's subprime lending". Reuters. October 16, 2010.
  52. ↑ CFC: Summary for COUNTRYWIDE FNL CP – Yahoo! Finance
  53. ↑ "Behind Bank of America's Big Gamble". The Wall Street Journal . January 12, 2008. Retrieved October 17, 2014.
  54. ↑ "Countrywide Shareholders Approve Deal". National Mortgage News. June 26, 2008. Archived from the original on August 14, 2009. Retrieved July 24, 2008.
  55. ↑ "BoA Completes Acquisition of Countrywide". National Mortgage News. July 1, 2008. Archived from the original on August 5, 2009. Retrieved July 24, 2008.
  56. ↑ "Bank of America's Countrywide purchase will cost 7,500 jobs". Chicago Tribune. June 27, 2008. Retrieved June 27, 2008.[ permanent dead link ]
  57. ↑ "Top Originators in Q108". National Mortgage News. Archived from the original on August 2, 2008. Retrieved July 24, 2008.
  58. ↑ "Bank of America to pay nearly $17 bn to settle mortgage claims". Philadelphia Herald. August 21, 2014. Retrieved August 22, 2014.
  59. ↑ Faber, David (June 4, 2009). "SEC Charges Ex-Countrywide CEO with Insider Trading". CNBC . Retrieved June 5, 2009.
  60. ↑ "SEC Charges Former Countrywide Executives With Fraud" (Press release). U.S. Securities and Exchange Commission. June 3, 2009. Archived from the original on June 7, 2009. Retrieved June 4, 2009.
This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.