The Countrywide Mortgage Credit Crunch and What It Really Means To You

Countrywide announced today that they had to borrow $11.5 billion from a group of 40 banks to fund loans.

This clearly shows us just how deep the lending crisis has become and shows you clearly why the smaller companies are closing.  They don't have access to this kind of capital.

But what does this really mean to you and your business?

When Countrywide made this announcement they said "some 90 percent of the loans it originates from now on will be conforming loans or will meet its internal bank criteria."

This means that they are going to adjust their product line mainly to Fannie Mae and Freddie Mac approved products.    That means loans $417,000 and under that require at least decent credit and that require the borrower to prove his income.

This also means Countrywide will be cutting out most of the subprime, alt-A and jumbo loan (over $417,000) products.

OK, but others will still offer those other products, right?  Very few.

Countrywide is the biggest, most respected lender in the country.  They lead the industry.  They buy the loans of many smaller brokers and even some huge loan brokers.

Today's announcement means a new beginning in the restructuring of the way we all do business.

If you have deals in progress, you want to get with your lender in the next day to make sure your loan, as promised, still exists.    If you are working with a new prospect, make sure he gets qualifed first and make sure he is prepared to show his income.

For those of us who were in the business in the days when the only way to go was Fannie, Freddie, FHA, and VA and stated income loan borrowers put down 10% and more, we are about to enter a time machine to the past.