Just Months After Reverse Mortgage Debut, Countrywide Faces Big Problems
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Just three months ago (May 14, 2007) Countrywide, the nation’s leading home lender, made a big debut into the reverse mortgage market with roll out of the SimpleEquity reverse mortgage program. Company officials made it clear at the time that they fully intended to become as big a player in the reverse mortgage arena as they already were in the traditional mortgage market:
Steve Boland, managing director for reverse mortgages at Countrywide, called the entry into these products “a very natural progression” for a lender that already ranked first among the nation’s traditional home mortgage providers by market share. Ultimately, he said, Countrywide aims to “dominate the reverse mortgage industry.”
Today (August 15, 2007) comes word that Countrywide faces the real threat of bankruptcy - victim of the spreading credit crisis. As reported by Bloomberg:
Countrywide Financial Corp., the biggest U.S. mortgage lender, fell 13 percent, the most since the 1987 stock-market crash, after Merrill Lynch & Co. raised the possibility of bankruptcy.
“Effective insolvency” would result if creditors force Countrywide to sell assets at depressed prices or investors lose confidence in its ability to raise cash, Kenneth Bruce, a Merrill analyst in San Francisco, said in a research note today.
Shareholders shouldn’t “understate the importance of liquidity,” Bruce wrote. “If liquidations occur in a weak market, then it is possible for CFC to go bankrupt,” said Bruce, who downgraded Countrywide to “sell” from “buy.”
Countrywide Bankruptcy May Impact Reverse Mortgage Borrowers
It’s too early to say what this might mean for Countrywide’s reverse mortgage clients (present and future). It seem likely that a reorganization plan, buyout, or other maneuver would keep Countrywide from complete meltdown. And, as industry officials are quick to point out - reverse mortgages are one of the few bright spots in the mortgage industry these days. Presumably, the reverse mortgage arm of Countrywide would survive and thrive in one form or another.
Still, it is not hard to imagine staff cutbacks, redirection of resources or other factors impacting loan servicing and the general level of customer service a struggling company is able to provide. Accordingly, borrowers would be wise to to take stock of the financial condition of lenders when seeking a reverse mortgage. With growing numbers of quality lenders entering the reverse mortgage market to meet the increased demand, senior homeowners do have have more choices than ever.
One resource borrowers may want to check out is The Mortgage Lender Implode-O-Meter, a regularly updated listing of mortgage lenders in different states of fiscal stress.
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