Countrywide Mortgage Feels the Sub-Prime Mortgage Crunch
The American Dialect Society has declared that “subprime” is the word of the year for 2007. Chances are that you don’t need to belong to this fun-loving wordsmith society to have heard of the term subprime, but you may be wondering just what subprime mortgages are, and how so many companies have been affected by it.
Countrywide Mortgage is one of the nation’s largest lending institutions for home mortgage loans, and as of 2007, some 45% of their mortgages were considered subprime. This means that they were loans that do not meet standard bank criteria for home loans.
There are a few reasons by banks may not find a particular loan applicant as a desirable candidate, and no doubt with the subprime crunch the way it is today, Countrywide Mortgage may have wished that they had paid better attention to this criteria.
For example, a poor credit history is one of the leading factors in being rejected for a home loan. It’s true that many people get into poor situations financially through no fault of their own, and sometimes they are able to put that behind them and are in a better position now to pay their bills on time. However, Countrywide Mortgage’s disregard for their customers’ payment history has cost them when it comes to subprime mortgages going under.
Most banks will want to see at least six months worth of timely payments on a person’s regular bills before they can be considered for a home loan, and there is good reason for this. If you are currently in a financial situation where you can pay your bills on time, why can’t you demonstrate this for at least six months?
Also, Countrywide Mortgage did not have the same employment requirements as many banks and lenders when it came to home mortgages. This is good news for those who don’t work in very high-paying jobs or who have faced unemployment in the past.
These unfortunate circumstances don’t necessarily mean that you shouldn’t be allowed a home loan. However, if Countrywide Mortgage had put some better requirements on their customers when it came to job history and stability, no doubt they wouldn’t have found so many of those customers now facing foreclosure and even possible bankruptcy.
Of course, Countrywide Mortgage is not the only mortgage industry to find itself caught up in the subprime mess. Many lenders simply wanted to offer loans to those who might not otherwise be eligible, as everyone should have a chance to own their own home.
And since they are involved in so many other elements of the financial industry, no doubt Countrywide Mortgage will bounce back and survive. But remember, sometimes there is legitimate reason why someone would be rejected for a loan as large as a mortgage; sometimes those reasons should be given careful consideration. Many people take a lesson from the crunch that Countrywide Mortgage is now feeling, and are being more careful about signing off on subprime loans.
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