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Countrywide Looking to Refinance, Dump Mortgages

The LA Times reported today that Countrywide is on a mission to refinance billions of dollars in mortgage loans in an effort to make them more salable on the secondary market.

Countrywide is seeking to refinance $12 billion so-called exotic loans into more traditional loans that be easy be dumped off to investors such as Fannie Mae and Freddie Mac, according to internal documents the paper acquired.

After the market for jumbo mortgages and other non-conforming loans dried up last summer, the lending giant was stuck with scores of loans it couldn’t sell.

According to the report, the Calabasas, CA-based mortgage lender has authorized employees to remove prepayment penalties, lower loan origination fees, and loosen other underwriting requirements to make things work.

“Countrywide is desperate to dump them to recoup the capital by refinancing them into marketable loans,” a senior Countrywide loan officer told the Times. “It’s the equivalent of a manufacturer who gets stuck with a ton of unsold merchandise after the Christmas season. So he says, ‘Let’s liquidate the inventory.’ ”

The paper also obtained details of the plan of action, which said all loans in question must adhere to the standards of Freddie and Fannie or the FHA/VA.

“You must figure out how to originate every loan as a Conforming or Government loan!” the instructions read. “Ineligible Loan Types: Do not originate!!!”

According to the aforementioned documents, if borrowers inquire about why they’re being asked to refinance, loan officers are instructed to say:

“As you may have read in recent news articles, Countrywide is committed to ensuring our borrowers are in the best situation possible. We want to help you by determining if we can significantly improve your mortgage rate and payment.”

A bit troubling that Countrywide is looking to refinance borrowers based on their own agenda, though I suppose the effort could help some borrowers.

The refinancing initiative is separate from the loan modification plan, of which results were released yesterday.

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