Commentary: Facing a Countrywide Foreclosure?

by Michael Blomquist - www.discountrealty.com

Only two short months after Bruce Marks, CEO of NACA publicly announced that he would begin to prey on Countrywide, Marks and Countrywide struck a deal. While watching the press conference (available here), my first reaction was Et tu, Bruce? How could Bruce sell out so easily? This man is a pitbull and his work as a consumer advocate is only rivaled by Nader's Raiders. Instead of the normal combative dialogue witnessed in ultimate fighting and Mark's customary conferences the two sides appeared to be auditioning for a Broadway musical. Only minutes into the conference both groups were singing and dancing to each others' praises. As the conference continued I became torn between thoughts of Countrywide throwing the "pitbull" a bone and a familiar battle cry, "keep your friends close and your enemies even closer".

After the Q&A session, reviewing other NACA press releases and the "deal's" loan modification requirements it was apparent this fight is far from over. Current loan modification requirements are as follows:

• Existing loan with Countywide
• You cannot own other property, and the property to be refinanced must be owner-occupied. (makes sense)
• You must have a predatory interest rate or unaffordable loan terms. The interest rate for the current mortgage(s) must be 10% or greater or considered to be predatory, or the home must be in need of substantial repairs. NACA considers loans predatory that have a teaser rate, but become high rate once they reset. (10% will substantially reduce the # of eligible home owners)
• The property to be refinanced must be within a NACA region where the NACA Program is available.
• The property to be refinanced and all requested money for improvements cannot exceed NACA's maximum purchase price limits set for that region. (Although there are exceptions, this could exclude the entire state of CA)
• You cannot have multiple refinances where you are continually taking money out to pay for your living expenses. This does not include refinances to obtain lower rates or to pay for one-time expenses such as home repairs, medical expenses, or education.
• You must have had your current mortgage for at least 24 months.
• All properties to be refinanced must have thorough home inspections—a complete house inspection and termite inspection. If applicable, a septic inspection will also be required. (hmmm, do these potential repairs involve government subsidies?)

Obviously, these requirements will greatly reduce the number of eligible homeowners and probably the reason why Bruce was so friendly during the conference; so much more needs to be accomplished with Countrywide and other lenders. Hopefully, Bruce can be as effective with honey as he is with vinegar. I am confident Bruce will continue the "good" fight.

To those of you who can meet these requirements you could be the proud new owner of a 5.375% 30 year fixed interest rate. If your current rate is 10.375% this is a monthly savings of $416 for every $100,000 and the rate is fixed for 30 years! For more information and eligibility visit www.NACA.com.

To the majority that don't fit these requirements and can not meet monthly obligations think seriously about selling, especially those in California. Home ownership is supposed to be a "happy place" not financial suicide. Pssst, even if your loan is paid off you should give serious thought to selling. And by all means if you are looking to purchase in California who cares if you can save 1-2% on your interest rate if your home value plummets.

A recent study from Goldman Sach's predicts that real estate prices will decline 35%-40% in California. I find it highly suspect that the data supporting Goldman's predictions was available in the beginning of 2004 when yours truly was actively screaming fraud and Goldman was selling record numbers of RMBS and CDOs. Once again the foot soldier is unheard, the contradictory, realistic general is fired and hidden agendas are more important than prudent public policy. A cursory glance of GS's current and past investments could provide ample motivation for this rather untimely release.

To those of you thinking you will just ride out the down cycle in a reverse mortgage or Option ARM give Mr. and Mrs. Nasdaq a call and see how the buy and hold theory plays out with other bubbles. Unfortunately for many real estate speculators leverage/margin was 100:1 versus a 2:1 for stocks; real estate commissions are a bit more expensive and the market is not quite as liquid. Home prices in our current real estate cycle have appreciated much higher and this cycle has lasted much longer than prior cycles. Home mortgage debt excluding equity lines has risen from approximately $5 trillion to over $10 trillion in 6 short years and thanks to Greenspan's recommendation a majority of these loans are of the adjustable and exotic varieties well equipped with devastating payment shocks.

If you can not afford an interest only payment you can not afford the home. Step away from the Option ARM, 100% financing and stated income loans, these products are the true "WMDs" and the financial terrorists behind these products should be brought to justice. Encouraging Americans to "catch a falling knife," especially with these loans is unconscionable.

If you are currently in an Option ARM loan or were deceived into over-stating your income you need to call 408.399.0590 or email michaelsblomquist@gmail.com today. Together we need to warn other borrowers, regulators and mortgage investors of the dangers of these loans and lending practices. For more information visit www.discountrealty.com. Hopefully we can get the "pitbull" to take the bite out of Option ARMs and other risky and hazardous lending products.