[8/18/07 Update:  I received word from my clients this morning.  Good news.  Countrywide came through on their loan commitment to the Buyer.  Looks like that infusion of $11.5 billion of liquidity (see below) made a difference.  These are tumultuous times, indeed.   Thanks all for your comments and advice.]

I experienced two Countrywide Home Loans dealings today:

1) I was speaking with past clients today who were supposed to have closed on the sale of their out-of-state home yesterday.  They (the Sellers) had signed the closings docs on Wednesday.  The Buyer, who was getting his loan through Countrywide, had been pre-approved, was ready to sign, and was simply waiting for his loan docs to arrive.  The loan docs never arrived.  After a few frantic calls to Countrywide, both Buyer and Seller learned that the funding was not going to happen.  "Sorry."  An explanation as to why was given but none of that really mattered to the Buyer or Seller.  The Buyer will move on.  My clients will put their house back on the market and start over

2) I received an email today from a Countrywide Home Loan Consultant contact of mine.  She shared with me the following letter that is to be disseminated to all interested parties.

To Our Valued Business Partner:

News about the current state of the mortgage industry can be unsettling for those of us who make our living in this business.  This challenging time has brought about greater than usual media coverage of our sector, including coverage about Countrywide.
With all the information that’s being distributed, I wanted to take a moment to personally update you on what’s going on at Countrywide.
We have supplemented our existing liquidity options by infusing an additional $11.5 billion in to our operation through a syndicate of 40 of the world’s largest banks.  More than 70 percent of this facility has an existing term of greater than four years.
We announced our strategy to fund a significant portion of loans through Countrywide Bank, which has approximately $100 billion in assets.  Today, we fund approximately 70 percent of our loans through Countrywide Bank, and expect that nearly all of our loan volume will be funded through the bank by the end of September.
We expect that approximately 90 percent of the loans we originate will be eligible for funding through Countrywide Bank or the Government Sponsored Entities (Fannie Mae, Freddie Mac).
Just this week, we increased our product options for fully documented Jumbo loans.
I want to let you know that while this industry turmoil may continue for some time, Countrywide is here to assist you in and meet the home loan needs of your customers.
While the current industry news can be unsettling, know that I am here, backed by Countrywide, to meet your mortgage lending needs.  Feel free to contact me directly by phone or email.
Sincerely,
[Countrywide representative’s name here]

Comments

[MikeZ]

That reads like every other press release from ever other company on the brink of collapse just before they've closed shop.

Until Countrywide can explain how they can possibly survive 6 more mos. with a 20% sub prime default rate and a 6% Alt-A default rate, they're just serving up Kool-Aid.

[Reno Ignoramus]

But not to worry Guy. You and I can go to the Fed's discount window and borrow $100,000,000,000.00 at quite a favorable rate. Then we can loan money to all your clients and acquaintances. That's what the Fed is for....to assist little guys like you and me and our friends. You could stop selling real estate and become a Gentleman Blogger.

[smarten]

Guy wrote: "the Buyer will move on [and] my clients will put their house back on the market and start over."

You may not want to hear this Guy but for whatever it's worth...

If Countrywide or any other lender for that matter made a written loan commitment to a borrower; the borrower satisfied all loan conditions; and then the lender refused to fund [thus killing one or more transactions]; ALL third persons reasonably forseeably relying upon that commitment who suffers damage [i.e., the buyer, seller, their agents, their buyers, sellers and their agents, and possibly even the various escrowholder(s)] have a direct action against the defaulting lender [isn't this an oxymoron (when is the last time you heard of a lender rather than its borrower "defaulting?")].

Therefore if you/your clients suffered damage [if we're in a declining real estate market, isn't it likely your clients' replacement sales price is going to be less?] as a result of Countrywide's failure to fund the subject loan, you might want to consider doing something about it [that something might be nothing more than a threatening letter (especially if now Countrywide's liquidity problem has been addressed)]. I realize no one likes the prospect of litigation but the only way entities like these change their m.o., is when they suffer detriment in addition to the detriment the mortgage industry as a whole is currently suffering.

Just ask Michael Vick.

[Reno Ignoramus]

I would guess that CFC has about 2,000 lawyers already defending about 2,000 lawsuits. About all of them would be willing to defend a case for damages brought by a realtor because his client's deal didn't close. Sure go ahead and write CFC a threatening letter. Then when they blow you off, what are you going to do? Sue CFC? CFC has legions of lawyers who have perfected the art of trip, stumble and delay. This is a company that can spend a hundred million dollars on lawyers fees. They ain't going to crack because they hear from you. Maybe after four years of litigation you could settle for a couple of bucks. Or, maybe, you would just be stuck with a claim in the BK.
I'm not intending to diminish the value of Smarten's post. It's just that there is a big big gap between the theory and the practicality when you are comtemplating roughing it up with a big dog like CFC.

I think you'd be better off, Guy, going in with me and borrowing from the Fed at the discount window.

[smarten]

R.I. wrote: "I think you'd be better off, Guy, going in with me and borrowing from the Fed at the discount window."

With all due respect, neither Guy nor R.I. has the standing to borrow anything from the Fed, let alone at the "discount window." That being the case, any other option becomes more productive.

R.I. may not realize Countrywide is in big, big trouble and that trouble extends far beyond the sub-prime mortgage market. It doesn't have hundreds of millions available to buy back problem loans, let alone to spend on attorney's fees defending against actions such as the one I initially suggested. The $11.5B referenced in the Countrywide press release refers to the $11.5B the Feds made available to Countrywide Bank avoid default.

When Guy makes a claim for third party damages, Countrywide will realize its problems extend far beyond sub-prime loan losses. And if one forseeable third party follows through on his/her/its threat, the flood gates will open.

At this stage, the cost of a letter from a well known real estate lawyer is relatively minor. The point will be made once the letter is received. If Countrywide can't connect the dots and Guy doesn't want to take the next step, that's his choice. But to blow off pursuing anything against a defaulting lender by going back to square one only sends the message: no harm, no foul. I don't think this is the message Guy wants to send.

[Reno Ignoramus]

You mean I can't personally show up at the Federal Reserve bank in SF and borrow $100 billion?? Oh, Smarten, I had no idea! Thank you soooo much for helping me understand that before I embarrassed myself.

And thank you also for helping me understand that CFC is in financial trouble. I have been living in a cave and had no idea!

I happen to know a little bit about litigation against major corporations. The notion that a letter from a lawyer in Reno is going to cause a coropoartion like CFC to change its way is charming. It's cute and quaint.

[SkrapGuy]

Until 3 days ago, CFC was on nobody's concern list. Then the credit crunch expanded, and some anaylst at Merrill moved CFC from a buy to a sell and happened to use the word "bankruptcy" in his analysis. A hyper-spooked market took the B word and ran with it.
Who knows what the real condition is of CFC. It is the biggest mortgage lender in America. It will in all liklihood survive.

RI is spot on here. CFC could give the proverbial rat's ass what some lawyer in Reno has to say. CFC probably gets 1000 letters a day from a 1000 lawyers threatening to sue it. This is nothing more than a cost of doing business for it.

[smarten]

Update:

In today's newspaper there is an advertisement by Countrywide Bank offering 12-Month FDIC insured CDs paying an above-market APY of 5.65%! This is in the face of what portends to be another drop in interest rates when the Feds have their next cost of funds meeting.

If successful, I guess Countrywide will use the infusion of new CD cash to pay those thousands of lawyers who respond to those thousands of letters from third parties who are damaged by their client's breach of contract.

But then, that leaves nothing left over for the sub-prime mortgage mess.

[MikeZ]

RE: "Countrywide Bank above-market APY"

As is IndyMac. I wouldn't buy a CD from either right now, at any APY.

[MikeZ]

Looks like the Kool-Aid has run out. CFC started laying off originators today.

http://tinyurl.com/ynk79q

[stjoe]

CFC could give the proverbial rat's ass what some lawyer in Reno has to say. CFC probably gets 1000 letters a day from a 1000 lawyers threatening to sue it. This is nothing more than a cost of doing business for it.
=========

This is why you make your complaint to the relevant licensing authority. While CFC may blow off "some lawyer in Reno" it definitely will not blow off a complaint from whomever licenses it.

I have used this technique numerous times. While I may not always get the solution I am looking for, the problem is taken care.

SJ