In a televised interview last night chief executive officer of Countrywide, Angelo Mozilo, said he believes its likely that the troubles in the housing market will lead to a nation-wide recession. From a CNN article covering the interview:
In a televised interview, Mozilo said, when asked if housing would lead the United States into a recession: “I think so … I can’t believe … that this doesn’t have a material effect … on the psyches of the American people and eventually on their wallet.”
There is a “very serious situation going on” in the U.S. housing market, Mozilo told CNBC Television. “This environment is certainly not getting better.”
Mozilo also went on the offensive regarding the Merrill downgrade of Countrywide stock last week. Mozilo in his own words called the downgrade “irresponsible behavior” on the part of the analysts who prepared the report.
Countrywide as the nation’s largest mortgage lender has much to lose from continued losses in housing. They are impacted not only by mortgage defaults but also through the increased cost of insuring their debt and loan loss provisions that require the company to tie up additional capital per banking guidelines.
While Countrywide may have escaped briefly with the Bank of America infusion of $2 billion in a preferred stock purchase; clearly the pain lies ahead for Countrywide. The majority of pay-option ARMs have yet to reset. Countrywide is the largest underwriter of payment option loans - the majority of which are set to reset in the coming 24-48 months. Stay tuned.
From Credit Suisse analysts regarding ARM resets:
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[Source: Blown Mortgage]
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