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Countrywide (CFC) Economics 101: WARNING TOXIC
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This Link is located in the Public Channel Housing Bubble and Bear Links.
Posted by ian 2 years 201 days ago (messages.finance.yahoo.com). Views: 71
Tags: housing bubble countrywide |
| Related Tags: credit crisis gold wall street peter schiff economics inflation banks |
NOTE: All facts from CFC SEC filings
1. How did CFC make money in the past? By opening the cash spigot lending over $500 Billion+- per year to a riskier tier of customers via riskier products and channels using low cost money provided by banks around the world. They made very thin net margins on massive volume by squeezing out fees, creating internal appraisal units, etc.
- Riskier Customers,Products: More than 50% in overheated CA, FL markets, Alt-A, Subprime, Option ARMS
- Riskier Channels: Rely on External Wholesale and Correspondent Channels for 67% of production, Retail only 25% and failed "full spectrum" 8%. Essentially they bought and repackaged loans generated by others who could care less about profitabilty and whose customers have no relationship with CFC.
- Cheap money: Now has dried up as investors, banks realizing their underpricing of risk, especially for the CFC flavor loan. Many loans can not be sold and gain on sale of loans which comprised most of CFC profits has collapsed.
2. Housing market in depression mode especially CA, FL, especially large ARMs right in CFC power ally, massive increases in write-offs CFC hold over $110 Bullion of these higher risk loans and plans to hold more that they generate and can no longer sell. So they will now continue to generate what no one will buy and hold on their balance sheet. Makes sense if you want to blow yourself up.
3. Broken economic model: industry volumes and funding dropping, cost of money much higher, stuck with 60000 plus staff no real diversification into other FS. What to do? Sell your CEO's stock, borrow more money, sell stock to whoever will buy, get ready to retire and blame the economy, markets, analysts. $500 million to CEO, best guess at debt/Equity ratio now 10 in order to prop up a balance sheet of assets no one wants to buy. Is it not incredible that analysts have FINALLY dropped estimates to a loss? Only analyst really digging into this says this quarter is $2.17 loss.
Ok what does this mean? It means get your deposits out of CFC and for goodness sake find out if your investments have any exposure to this EPA MEGASITE.
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ian said |
| 2 years 200 days ago |
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more analysis
http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_C/threadv...
1. The mortgage business as a whole will decline.
2. CFC's most profitable product lines have been shut down.
3. CFC's cost of funds have gone way up.
4. CFC's portfolio of loans contains a mountain of toxic waste it can't sell.
5. CFC can't get more loans, so it can't finance more mortgage financing of loans it probably couldn't sell anyway. (Would you buy anything from a company in this desparate shape?)
6. Back in 2006 CFC made about $2B pre-tax on mortgage originations of circa $430B, mortgage servicing and everything else - a pre-tax margin of 5/10's of 1% on the mortgage servicing.
Questions for the class:
How much of a decline in business will it take to wipe out CFC's profit margin?
If loan production declines by 1/3, how much money will CFC lose per quarter? How long can CFC stay in business at that rate?
How much of a mark-to-market decline in CFC's $140B loan portfolio (and $100B of guaranteed loans) will it take to wipe out CFC's $13B (alleged) book value?
How much will CFC lose in lawsuits to customers to whom it made loans and coustomers to whom it sold loans?
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