04
Mar
09

Countrywide Making Money Off Fire They Started


Are they evil? Brilliant? Both?

From the NY Times today:

Stanford L. Kurland, Countrywide’s former president, and his team have been buying up delinquent home mortgages that the government took over from other failed banks, sometimes for pennies on the dollar. They get a piece of what they can collect.

“It has been very successful — very strong,” John Lawrence, the company’s head of loan servicing, told Mr. Kurland one recent morning in a glass-walled boardroom here at PennyMac’s spacious headquarters, opened last year in the same Los Angeles suburb where Countrywide once flourished.

“In fact, it’s off-the-charts good,” he told Mr. Kurland, who was leaning back comfortably in his leather boardroom chair, even as the financial markets in New York were plunging…

“It is sort of like the arsonist who sets fire to the house and then buys up the charred remains and resells it,” said Margot Saunders, a lawyer with the National Consumer Law Center, which for years has sought to place limits on what it calls abusive lending practices by Countrywide and other companies.

More than any other major lending institution, Countrywide has become synonymous with the excesses that led to the housing bubble. The firm’s reputation has been so tarnished that Bank of America, which bought it last year at a bargain price, announced that the name and logo of Countrywide, once the biggest mortgage lender in the nation, would soon disappear…

“Kurland is seeking to capitalize on a situation that was a product of his own creation,” said Blair A. Nicholas, a lawyer representing retired Arkansas teachers who are also suing Mr. Kurland and other former Countrywide executives. “It is tragic and ironic. But then again, greed is a growth industry.”

Here’s where the “evil” part really comes in:

[A] PennyMac representative…offered to cut the interest rate on their $590,000 loan to 3 percent, from 7.25 percent, cutting their monthly payments nearly in half, [Margarita] Laverde said.

“I kept on asking, ‘Are you sure this is correct? Are you sure?’ ” Ms. Laverde said. Even with this reduction, PennyMac stands to make a profit of at least 50 percent, a company official said.

Ms. Laverde could not care less that executives at PennyMac used to work at Countrywide.

“What matters,” she said, “is that we know our house is secure and our credit is safe.”

I’m with Ms. Laverde. That is indeed what is important.

That said, this whole thing makes me sick. I think it makes me sicker that it’s technically legal. It sort of smacks of premeditation in that way, like they checked with their lawyers ahead of time to make sure the government would step in to help people out once they created desperate situations for them; checked to make sure they’d still be able to keep their money; and then checked that they could use said money to profit even further off this crisis that, it deserves repeating, they created. And swooping in to rescue these poor people who are grateful to be able to retain basic shelter…egads, I feel like I need a Silkwood shower just reading this.

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