Secret Countrywide Bailout: Senator Schumer Rips the Atlanta Federal Home Loan Bank

Very quietly, Countrywide has once again proven the claim: “No one can do what Countrywide can.”

After pushing the worst mortgage junk ever created, pushing their originators to sell that crap, pushing their stock in insider trading schemes before the meltdown, they have pushed this garbage on the Atlanta Fed as collateral for a quiet loan of $51 billion of your money.

A few days ago, New York Senator Charles Schumer was concerned enough about Countrywide to write this letter to the Atlanta Federal Home Loan Bank. In it he says:

I write to express my serious concern over the lending practices of the Federal Home Loan Bank of Atlanta, specifically in regard to the significant volume of advances made to Countrywide Bank. I am concerned that the loans being pledged by Countrywide to secure these advances may pose a risk to the safety and soundness of the FHLB system as a whole.

In exchange for the $51.1 billion in advances, Countrywide pledged $62.4 billion in loans, nearly 80% of its entire investment portfolio, as collateral. Of that, almost half consisted of pay option ARMs, most of them underwritten without any income verification. Delinquencies on the company’s pay option ARMs leaped 78% in the last quarter.

Schumer continues…

I find these numbers alarming as reports continue to emerge about how Countrywide’s reckless and predatory lending practices were a leading contributor to today’s foreclosure crisis.

And finally,

Given this rapid deterioration in the credit quality of Countrywide’s option ARMs, I urge you to conduct a review of the loans that are being held as collateral for FHLB advances….89 percent of their 2006 originations of pay option ARMs did not conform to the joint regulators’ guidance, which increases the likelihood that Countrywide is pledging loans deemed predatory by the regulators as collateral for FHLB advances.

Is Countrywide long for this world? Who knows. But like a homeowner that just refinanced and pulled all their equity out to survive, the signs aren’t good.

So choose your lender carefully. An experienced mortgage broker can shop among many banks, picking the stable ones with the best terms and avoiding the weak ones.

Apply for loan here. Contact me here. Leave a comment below. I’ve been a lender for 18 years, and I do loans in most of the western U.S.

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