Countrywide's desperate rescue plan

Who is the mortgage lender really trying to save with its $16 billion subprime bailout? Struggling homeowners, or itself?

Published October 24, 2007 11:00AM (EDT)

Another day, another letter, addressed to me, from Countrywide. Two weeks ago, the company wanted to sell a protection plan for my big-ticket home appliances. Today, the pitch is for car insurance. Yesterday, yet another "special invitation" to refinance my home loan. I've been writing checks to Countrywide for six years, but in all that time I've never been blessed with such an abundance of up-close-and-personal attention.

Nonetheless, I just can't ignore the dour smell, the flop sweat of desperation that clings to every missive. Countrywide will be announcing their third quarter earnings this Friday, and the news is not expected to be good. It is beyond obvious that the corporate word has been laid down to every remaining employee: raise cash, now. If that means chopping down a forest to blanket the nation with mailings, no worries -- the forest products industry needs some love too, with all those saw mills idled by stillborn suburban developments.

Which all leads me to be skeptical of Countrywide's announcement on Tuesday that it will come to the rescue of at least 82,000 of its beleaguered subprime mortgage holders with a package of refinancing assistance and loan modifications worth a reported 16 billion dollars.

Countrywide executives are hoping that the move will be perceived as an example that the company is doing the right thing.

"We are determined to assist borrowers who have the willingness and wherewithal to remain in their homes, but need a little help to do it," said David Sambol, Countrywide's president and chief operating officer.

In some quarters, the move is being received precisely thus. Senate Banking Committee Chairman Chris Dodd called it "a welcome, if late decision" and Bruce Marks, chief executive officer of Neighborhood Assistance Corporation of America, labeled it "a big step," reported Bloomberg News. So maybe now we should all stop talking about CEO Angelo Mozilo's $136 million stock dump earlier this year, and tell the New York Times' Gretchen Morgenson to get off Countrywide's case.

Nope. Sorry. How the World Works isn't ready to move on. The rescue plan may well turn out to be a good thing for homeowners -- though the devil will be in the details, and so far all we've got is a press release to go by -- but, as CNBC's Diana Olick observes, "the company simply has to do this because there is no way it can survive otherwise." A continued swell of mortgage defaults and foreclosures will be a disaster for Countrywide. Already, reports the Financial Times, more than 13,000 properties are advertised for sale on Countrywide's Web site, up from 5000 in January.

As it sits on top of a growing stockpile of homes whose value is plummeting, in a market where no one wants to buy, with hundreds of billions of dollars of subprime ARMs yet to reset, yeah, sure, Countrywide is going to try and help you keep your home. Better you get stuck with it than them.

By Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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