Mortgage Market Update from Michael Gross

Countrywide’s Slide:

Countrywide’s stock is down by 21% since last Wednesday. The company reported “unprecedented disruptions” in the mortgage backed securities market “could have an adverse impact” on its earnings and financial condition. Merrill Lynch’s Kenneth Bruce wrote: “If enough financial pressure is placed on Countrywide or if the market loses confidence in its ability to function properly, then the model can break, leading to an effective insolvency. If liquidations occur in the capital markets, then it is possible for Countrywide to go bankrupt.”

First Magnus, Last Place?:
First Magnus announced today that it will no longer fund mortgage loans. Is this the last of the nations top 20 lenders to fold, or will there be more to come?

Thornburg’s Demise:
In a piece of positive news, Thornburg mortgage announced that the report of their demise was unfounded. They are solvent and continue to fund loans.

My Thoughts:
As we traverse the rocky roads of this current market downturn I can’t help but be encouraged. The mortgage industry is experiencing its equivalent of the (dot)Com implosion of the 90’s. By all economic indicators, the overall economy is strong. Nation wide home values have dropped less than 1.5% with starter homes taking the largest hit. The actual pool of sub-prime loans as compared to all mortgages is approximately 15% and only 10% of those loans are expected to go into foreclosure. That number reflects less than 2/10ths of 1% of GDP. In my opinion, the markets are simply correcting and the mortgage industry is being washed out of all the failed and flawed business models. When the dust settles, the companies that remain will be those that have profit driven business models that balance consumer needs with investor needs…..profit. The American economy will be stronger in the end and we will all be better off.

I am optimistic about our future and I fully expect the market to stabilize in the next 90-180 days. When it does you will find that some of the most aggressive lenders in our market are no longer around and many of the know-nothing loan officers who were left over from the fast money days of the refinance boom have been washed out of the industry. Realtors, Homebuyers and Real Estate Investors can breathe a sigh of relief because the real professionals will be left and it will be easy to spot those who know the business from those who don’t.

My team and I look forward to being here for you now and into the future to meet all of your lending needs. Thanks and we’ll see you soon! J

Sincerely
Mike, Candace & Jo
Michael D. Gross
President
Dividend America |Mortgage
770-350-7373
www.dividendamerica.com