Countrywide's Brilliant Move

Even though I think CEO Mozillo sold shares based on the upcoming credit issue and will be found guilty of doing so, this move by Countrywide (CFC) will buy them a level of goodwill with consumers that will benefit them for years.

Countrywide has enacted a "Home Preservation" program aimed at helping some 82,000 customers holding approximately $11.4 billion in loans. There are three facets to the program for customers who qualified for a subprime, adjustable-rate loan and are facing a rate rest through the end of 2008.

The first, aimed at Countrywide customers with a strong payment history, will offer borrowers options to refinance into prime or Federal Housing Administration loans. For those with credit issues, Countrywide will offer Fannie Mae or Freddie Mac's expanded criteria programs.

The second is for for Countrywide borrowers who have both prime and subprime loans, but are unable to qualify for a refinance and are likely to have difficulty affording an upcoming reset. Countrywide will supplement its early notification letter to borrowers by calling no later than three months prior to the reset to determine their financial circumstances and develop affordable solutions.

Finally, for subprime borrowers who are currently delinquent and are experiencing financial difficulties as a result of a recent reset, Countrywide has a simplified loan modification process, and is in the process of sending letters to these borrowers offering a pre-determined and pre-approved rate reduction.

Think about it. Is there anyone out there who will not at least contact and inquire into a Countrywide mortgage next time they are looking? Countrywide is the first lender to voluntarily offer to assist homeowners facing resets that will eventually cause them to lose their homes. It is a double win for Countrywide because they can stop foreclosure on a home, a situation in which nobody wins, and they now become the "lender who helped people save their homes". That is a reputation that you just cannot place a price tag on.

It will also force the other banks now to follow suit to help additional borrowers. If this effort takes hold at other banks, it actually buys Countrywide even more goodwill as the effort will gain even more publicity and Countrywide's actions will become known to more people as every news story about it will undoubtedly mention Countrywide's leadership in the effort.

I do not have a subprime loan nor am I am a subprime borrower but if I do decide to refinance when rates fall, I will take a look at what Countrywide has to offer. I will do this not because I fell my ability to repay would be at risk but I do recognize that bad things happen to people all the time and having my largest monthly obligations in the hands of people who have demonstrated a willingness to help people would give me a certain level of comfort. Like I have said before, most people tend to think similarly and I would be willing to bet there a a whole bunch of folks out there who, when the time comes will at least see what countrywide is offering for mortgages.

Brilliant.... I wonder how long it will take Bank of Amercia (BAC), Citigroup (C), Washington Mutual (WM) and other to respond in kind?

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