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I'm supposed to close on a Countrywide mortgage in just a few days or weeks. Should I worry?
The answer to this question depends upon whom you ask, how soon you plan to close the loan and what type of mortgage you're getting.
If in the next couple of days you're getting a plain-vanilla, fixed-rate, conforming ($417,000 or less) mortgage and you're fully documenting your income, you almost surely don't have to worry about Countrywide's problems causing a delay or cancellation of your closing.
What if you're a week and a half or more from your closing date with a Countrywide loan? Most experts say that you shouldn't worry at all if you're getting a plain-vanilla, conforming loan. Christopher Cruise, a loan officer trainer and industry observer, reluctantly disagrees. "If it was two days, maybe," he says. "But the way this is accelerating . . . it's moving so fast, that if it's not closing with Countrywide in the next couple of days, I'd ask the broker to shift it to Bank of America (BAC, news, msgs) or Wells Fargo. I only say this because Countrywide says the liquidity is just not there."
Lepre says: "It behooves everybody out there who's getting a loan to get funding from a lender who will close the loan. How do you do that? I guess my first take would be to say you want to do business with a lender that isn't depending on selling this mortgage to somebody else in the present environment."
And that means it's safer to get a mortgage from a bank that accepts deposits and thus has another source of liquidity. Lepre doesn't name names, but Cruise mentioned two of them: Bank of America and Wells Fargo. Washington Mutual (WM, news, msgs) is another, and there are dozens of regional banks, such as National City (NCC, news, msgs) and SunTrust Banks (STI, news, msgs), that underwrite mortgages.
If you're getting a mortgage (from Countrywide or another lender) that's for more than the $417,000 conforming limit, or has a complexity such as stated income, you'd better act fast, Cruise says.
"Hold your breath and see if you can move the closing up," he advises. "Provide whatever documents. Take a quarter-point hit in the rate. Do whatever you can to get it closed before the window closes. Deal with what clearly is an overreaction here, but just get that sucker closed."
Dan Green, mortgage planner with Mobium Mortgage in Chicago, says: "If you're worried that the money won't be at your closing because the lender closed its doors, put in a phone call to somebody that can give you a strong referral to a loan officer who can help you."
You want a referral to someone who has been in the business for several years, Green says, because inexperienced brokers and loan officers aren't familiar with the wide array of available loan products. "For a very long time, you only needed your primary colors," he says. "But now you need to use all 64 colors in your crayon box. There are still plenty of products out there -- plenty of people buying homes, still being approved. It just requires more knowledge from the loan officer to make it happen."
More from MSN Money and Bankrate.com
"I don't think anybody should worry about where they're sending their check," Lepre says. "Worrying about who you send your payments to -- that's meaningless."
An economist for a large mortgage-industry player agrees. "Customers shouldn't really encounter any major issues," he says.
Countrywide's servicing rights are worth a lot of money. If Countrywide were to seek bankruptcy protection, it's possible that creditors would insist that it sell some or all of its mortgage-servicing rights. If the entire portfolio of servicing rights were sold, it could turn into a logistical nightmare. Buyers of servicing rights would receive tractor-trailers packed with paper and reel-to-reel tapes. They would have to match Countrywide's data on the tapes to their own databases.
"This is uncharted territory," Cruise says. "This is Columbus leaving the coast of Spain, headed for India -- and America comes up."
Video on MSN Money
A closer look at Countrywide FinancialChairman and CEO Angelo Mozilo regularly reminds investors he's been through many ups and downs in the mortgage markets. But today, he's straining to contain Countrywide's biggest crisis since he co-founded the company in 1969.
"I'd watch the escrow account like a hawk," Cruise says. "Just make sure the money is going into the insurance and the tax authority -- where it's supposed to go."
This all sounds alarming. Should I be alarmed?
Don't be fearful. Be watchful. Countrywide has been well managed over the years, or else it wouldn't have grown into the biggest mortgage lender. Even if it were to declare bankruptcy -- a big if -- that doesn't mean it would shut its doors. It probably would continue to operate while it got its affairs in order.
This article was reported and written by Holden Lewis for Bankrate.com.
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