Countrywide’s Official Response to the NY Times

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Countrywide issued an official response to the scathing New York Times expose on the mortgage lender’s alleged institutionalized practice of steering borrowers in to high cost loans. The lengthy, 3 page statement can be found here. (PDF)

In short, Countrywide categorically denies institutionalized steering and highlights everything the company does to ensure the highest percentage of people eligible for prime products end up in prime loans.

Here are some highlights:

Countrywide?s business processes are designed to prohibit steering borrowers who qualify for prime loans into subprime loans. In fact, the majority of consumers who come through Countrywide?s retail subprime channel receive a prime loan.

Second, Countrywide?s loan officers do not receive higher commissions for subprime loans with repayment penalties.

Third, Countrywide prides itself on the extraordinary efforts we are undertaking to assist borrowers who are experiencing difficulty making their loan payments, and in fact we have found solutions to keep more than 35,000 borrowers out of foreclosure during this year alone. The company has a team of 2,500 employees in its Home Retention Division dedicated full-time to these efforts.

…

Countrywide?s systems, scripting, training, policies and procedures focus on providing loan options that meet a borrower?s individual objectives. We are committed to supporting every effort to help borrowers make informed credit decisions and understand the options available to them. A proprietary financial benefits worksheet is used with every subprime borrower to determine the benefit of the loan products offered. We make loans that provide a financial benefit to the borrower.

It is very hard to prove institutionalized steering. I know from a broker perspective there was always the carrot dangled of major rebates and fees on higher-cost loans (such as pay option ARMs) but that was on the prime side. I know that Full Spectrum and Countrywide retail are super-aggressive but I think it’s a stretch to say they made steering customers part of corporate guidance.

Could a sales team, branch office or loan officer take a mindset to maximize fees on products? Of course. Would a large company intentionally build its systems to funnel customers to subprime, it seems dubious.

What do you think?