Despite the nation's largest home mortgage lender basically forecasting a credit crunch, a state official says he's not seeing its impact in the Baton Rouge area yet. In a recent regulatory filing with the Securities and Exchange Commission (SEC), California-based Countrywide Financial Corp. says the industry is facing "unprecedented disruptions" in debt and mortgage-finance markets that could hurt earnings and the company's financial condition.
Darin Domingue, deputy chief examiner of the Louisiana Office of Financial Institutions, says his office hasn't gotten many complaints from people having difficulty getting a mortgage. At this time, he's handling one complaint. "I don't think we're experiencing some of the problems that there are in other markets," Domingue says based on his contact with other state regulators. "Lenders in general are being impacted because of the market and some have had Louisiana loans at risk of not being funded, but to date I'm not aware of any of them that has had a problem. Some loans are being delayed, but for the most part people are getting their loans."
However, he does anticipate more defaults and delinquencies in the Alt-A loan (requires little to no income verification) market in coming weeks, which is contributing to disruption in the "structure finance market" that provides liquidity to fund mortgage loans. Domingue says, "The uncertainty of the market with these loans has resulted in a decline in investor appetite for those types of securities. As a result of this, lenders are finding it more difficult to sell mortgage loans at prices that make originating new mortgage loans economically feasible."
According to Countrywide, reduced investor demand is prompting it to keep, rather than sell, more loans. The company also has been shoring up its finances. "While we believe we have adequate funding liquidity," it wrote in a quarterly filing with the SEC, "the situation is rapidly evolving and the impact on the company is unknown."
Payments were at least 30 days late on about 20% of "nonprime" mortgages serviced by Countrywide as of June 30, up from 14% a year earlier, according to The Wall Street Journal. Nonprime includes loans to people with weak credit records and high debt in relation to their income, as well as to people who don't document their income or assets. On prime home equity loans, the delinquency rate was 3.7%, up from 1.5% a year before. For all loans, the rate was 5%, up from 3.9%.
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