Countrywide Update

This is unquestionably one of the most challenging times in the annals of mortgage lending. As such, this communication is the first of a series that will outline how Countrywide^®, America's Wholesale Lender^® is navigating through this challenging market. Additionally, it is my desire that these ongoing communications will share some perspective that will help you to adapt and prosper in the current mortgage lending environment.

Countrywide in the News

First, I would like to take a moment to address some recent developments that have strengthened our ability to serve both you and your borrowers.

• Bank of America Investment in Countrywide - On August 22, Bank of America invested $2 billion in Countrywide in the form of non-voting, convertible preferred securities. It is important to note that this is an investment in, and not an acquisition of Countrywide. Bank of America does not have representation on Countrywide's board or a management role in the company.
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  The investment is a true vote of confidence in Countrywide from the largest retail banking franchise in the nation. It strengthens our balance sheet and benefits all of Countrywide's constituents including our Business Partners.
  
  
• Additional Funding Liquidity - We have recently drawn upon credit facilities provided by a syndicate of 40 of the world's largest banks, which provided an infusion of $11.5 billion to supplement Countrywide's liquidity.
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• Mortgage Business Migration - We recently announced that we have accelerated our long-held plans to migrate our mortgage business into Countrywide Bank which has over $100 billion in assets. We are executing this migration as quickly as possible and do not expect it to materially change the way we operate, our key strategies, or our continuing goal to be the dominant lender in the wholesale channel.

Now that I've outlined the steps taken to strengthen Countrywide's franchise, let's turn our attention to the current market environment.

Secondary Market Driving Change

Further complicating an already tough real estate and lending environment is one of the weakest secondary markets in history. The result is that there is limited demand for mortgages or mortgage-backed bonds other than what is commonly referred to as the "agency" execution (Fannie Mae and Freddie Mac). Despite this disruption in the secondary market, substantial lenders like Countrywide, with access to a bank balance sheet, are well positioned to succeed.

In an effort to address the above challenges, Countrywide, along with the rest of the industry, has been revising product guidelines and pricing policy on an ongoing basis. It is likely that these areas will continue to change so I urge you to check cwbc.com frequently to ensure that you have our most updated guideline and pricing information.

Channel Dynamics

Another challenge facing the wholesale lending channel is that the mortgage industry has shifted toward a retail bias. Why? There are many factors. However, one of the major causes is that loans originated and processed on a retail basis generally perform better than third party originations where an intermediary originates and processes the loan on behalf of the lender.

While this bias may seem daunting to your business, it is a challenge that can be overcome with a simple formula - everyone involved in the wholesale lending channel must work to improve the performance of third party originated loans. By consistently elevating borrower and loan quality, we can, over time, bring the market back to parity. Your best source for ensuring loan quality is to work closely with your Account Representative and branch or fulfillment center to assist in properly documenting all loan submissions consistent with lending guidelines and loan approval conditions.

In addition, it is imperative that you adopt (or continue) the proven "best practice" of presenting your borrowers with a full array of product and pricing options. Your focus should be on allowing them to make truly informed decisions that best meet their financing needs and ability to re-pay. This practice will not only ensure a long term relationship with your customer but is part and parcel of ensuring high quality loans and good performance.

Our Ongoing Commitment to the Channel

As stated in the opening of this communication, all of us who earn our living in the wholesale lending arena are facing challenging times; times that require us to work together to achieve a common goal - successfully evolving the wholesale lending channel.
Our focus at Countrywide remains constant - working with and supporting only those brokers who can adapt and evolve their business model and who can originate quality loans consistent with our strengthened lending standards. None of us should ever contemplate doing a loan we wouldn't be willing to fund with our own money.

When navigating the current waters, keep in mind that, for over 23 years, Countrywide, America's Wholesale Lender has been fervently committed to the wholesale channel and to the success of our Business Partners. We maintain a strong leadership position and focus on achieving a dominant status among wholesale lenders.

Thank you for your time and attention to these important matters.

Todd A. Dal Porto
Senior Managing Director & President
Countrywide, America's Wholesale Lender