You gotta love it, if it happens. A Countrywide bankruptcy, that is. That company was the worst purveyor of sub-prime mortgage loans, NINJA (No Income, No Job, No Assets) mortgages, sold more crap, did more to cause the real estate bubble than any other company.
For which they were rewarded by getting Bank of (everything in) America (BOFA) to buy them before the bubble burst.
Now the rumors are swirling again, that BOFA will put Countrywide into bankruptcy.
Why not? Countrywide contributed mightily to tens of thousands of Americans filing bankruptcy.
Countrywide gave anyone who could fog a mirror a loan.
125% loan to value, nothing down, 80-20 mortgages, interest only, ARMs, the full gamut.
Did not matter to them that the mortgage brokers they used stuck people into loans they could not afford from day one. Or lied about what ARM (adjustable rate mortgage) meant, so the homeowners were whacked when rates re-set up for the first time.
Lots of those home owners had to file Chapter 7 bankruptcy. Depending on what state you live in, you could still owe money to the mortgage company after foreclosure.
But Countrywide was not just ripping off consumers. Those crappy mortgages were sold in securitized trusts to investors. Who were lied to about the quality of the mortgages.
Investors thought they were getting debts secured by equity in a home. They did not know about the bogus appraisals
They thought the people buying the homes had income with which to repay the loans. They did not know about “no doc” loans, where the mortgage broker just made up something.
I had clients who sent the broker their pay stubs and tax returns. No go. So the broker sent it in as no doc, and gave them job classifications that showed on the chart they used, that there was enough income to qualify.
This couple were employed as a janitor and a maid. But the broker put them down as maintenance management, and the chart showed what that job classification earned in Michigan, and presto! They got a mortgage they could not afford. The broker did not care; he got his commission at closing. Countrywide sells the mortgage and books the profit. The investor gets stuck when the loan goes belly up, the foreclosure process finishes, and, guess what? The house was not worth the appraisal amount. Not even close.
So the investors are suing the pants off Countrywide, and others.
And BOFA says if they do not accept the $8.5 billion offer, Countrywide might just shuffle off to bankruptcy court.
Gee. Too bad.