A Penny For Your…..Mortgage?
Who knows what to think about anything these days? It is hard to wrap one’s head around anything when so much is happening and none of it seems to be good. And so, when I learned that Stanford Kurland, the former president of Countrywide, had started a new mortgage company, my first reaction was, ohhhhhhhh boy, here we go again. I mean, there are a boat load of lawsuits underway against Countrywide, and some of them are accusing Kurland of being one of the main guys responsible for the irresponsible lending practices that dished out billions of dollars in risky home loans, which inevitably led to Countrywide’s demise, and left thousands of people risking foreclosure. But then I learned what his new company was doing, and my initial thoughts towards the man and his company changed.
The Private National Mortgage Acceptance Company, or simply PennyMac, buys up delinquent home mortgages that the government took over from failed banks for a fraction of what they are worth, and get a piece of what they can collect. As an example, PennyMac would buy a delinquent $500,000 mortgage for say, $180,000 (of course, in reality they are buying many mortgages at once). When they buy these mortgages for pennies on the dollar, they can afford to restructure the loan with the homeowners, slashing the interest rates, keeping the owners in their homes and making payments. And PennyMac gets to keep a share of the money coming in from these mortgage payments, which otherwise might not have been made. So this is not only helping homeowners, but it is helping the government get back some (as opposed to none) of the money from the bad mortgages they bought up.
According to Eric Lipton in an article for the New York Times, PennyMac struck a deal with the FDIC (Federal Deposit Insurance Corporation), where “it paid $43.2 million for $560 million worth of mostly delinquent residential loans left over after the failure last year of the First National Bank of Nevada.” Lipton goes on to say that, “Under the initial terms of the FDIC deal, Penny Mac is entitled to keep 20 cents on every dollar it can collect, with the government receiving the rest. Eventually that will rise to 40 cents”. They’re doing to be doing real well. And some whom they have helped are doing well as a result also.
Lipton describes the Laverdes family had fallen three months behind on their mortgage after their furniture store began feeling the pressure of the economic crisis. They were “fearful that they might need to move their four children, three dogs and giant saltwater aquarium into a cramped apartment, leaving behind their dream home. But a PennyMac representative instead offered to cut the interest rate on their $590,000 loan to 3 percent from 7.25 percent, cutting their monthly payments nearly in half.” Wow, go delinquent for a couple months and get rewarded with a 3% interest rate! Must be nice.
So perhaps our country needs more companies like PennyMac right now. Take some of the burden off government and banks and struggling homeowners, and turn a pretty profit while they do it. Is it too much to hope that companies like this can help stabilize the housing market? Probably, but like I said, I don’t know what to think at this point, so any beacon of light in this dismal economy and I’m going to cheer it on.
By Andrew Brentan
March 5th, 2009 at 5:12 pm
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March 6th, 2009 at 1:12 am
Hmm….so after running one company into the ground he gets to walk away, wealthy and start another. Doesn’t seem to be that fair, does it? BUT if it helps people not lose their homes….
Charles’s last blog post..First Time Home Buyer Tax Credit
March 6th, 2009 at 3:26 pm
The word \”justice\” in this economy is certainly skewed. Those that were greedy get bailed out. Just another example of justice gone off-kilter.
March 6th, 2009 at 3:30 pm
Brilliant. I would love to have the power to go out and have the ability to purchase up a bunch of delinquent mortgages for pennies on the dollar and structure sweetheart deals with the owners and then collect 20%. Don’t be fooled though… while I can be a pretty generous person my intention would be to make money and I would be purchasing them for less then what they would be on the open market.
Sorry… big red flag here for me when somebody formerly running a company known for big campaign contributions to all the right people has an inside track on having the ability to buy up something that could be worth more on the open market.
As far as stabilizing the market… you need to understand that companies such as Countrywide were responsible for the real estate market getting bloated in value in the first place. When you let people run around and buy several homes at a time simply by signing a stack of papers, it’s certainly going to have an effect on values.
March 7th, 2009 at 8:50 am
Ok give me the penny
March 8th, 2009 at 11:55 am
Maybe this was part of his master plan. First he would make tons of cash by making questionable loans and then buy those questionable loans for pennies on the dollar and make even more money. Lol
March 9th, 2009 at 4:41 am
Running a mortgage company now would be a nightmare! If it helps people than it’s a great idea but lets see if it really helps people out!
March 9th, 2009 at 4:05 pm
I was not happy with Countrywide’s practices through the years, but am glad to hear the president of that company is using his ideas to help with the problems he helped create.
March 9th, 2009 at 9:21 pm
This has been a hot-topic in the blogosphere as of lately. Anger and frustration has been felt by most of us in the real estate industry regarding this garbage. How can this really be happening????
March 10th, 2009 at 3:33 am
It’s ironic that the guy that made his money creating this problem will continue to make money cleaning up this problem. On the other hand, it’s nice to see that this is helping some homeowners. If you can avoid foreclosure for just a few family’s and the banks are happy with the modification they make then it works out for everyone.
March 10th, 2009 at 5:03 am
Its a win win situation and he looks very happy. His bad practice has impacted on more people than he is now helping.
March 10th, 2009 at 10:02 am
I didn’t know much about him.Thanks for the sharing.
March 11th, 2009 at 10:43 am
Wonderful idea and great of PennyMac to help out homeowners-it would be nice if more companies were able to do this and help even more homeowners keep their homes.
Linda Craft-North Raleigh Real Estate’s last blog post..Should Buyers Buy in a Buyers Market?
March 11th, 2009 at 11:06 am
Companies doing what PennyMac is doing might be more effective than any bank bailouts at keeping families from losing their homes to foreclosure.
Scott Patterson-South Florida Real Estate’s last blog post..Golden Pointe Aventura Florida
March 11th, 2009 at 8:31 pm
One side is of me feels like he is capitalizing on something he created, the other thinks that this can be very valuable if you can help people avoid foreclosure. That is something that will help this economy improve quickly!
March 11th, 2009 at 9:31 pm
Yeah, if it helps people then great. I guess he deserves to make money for taking the risk he is taking on these bad loans.
March 16th, 2009 at 4:22 am
I agree with Business for sale Ontario That the word justice” in this economy is certainly skewed
March 16th, 2009 at 3:35 pm
Interesting article, it would be nice if PennyMac can at least help stabilize the housing market. Almost anything would help right now!
Medical Real Estate’s last blog post..Update to Medical Office Space Book
March 18th, 2009 at 1:06 pm
Yeah that sounds great. It will help stop foreclosures for sure.
March 19th, 2009 at 10:01 am
Neither he nor anyone else should be making money off of any program that has to do with the real estate market. You can bet there is no risk to him, only the consumer.
April 8th, 2009 at 5:52 pm
What’s the difference between what this guy did and a.) burning down a bunch of people’s homes and collecting the insurance money and then b.) getting paid to rebuild the burned-down homes? This guy is a scumbag of the first order, profiting from his own criminal behavior!
April 22nd, 2009 at 4:40 pm
Excellent!
May 15th, 2009 at 3:08 pm
Beyond PennyMac, another such example is San Diego-based National Asset Direct, which owns its own servicing shop called iServe Servicing; Marathon Asset Management, LLC, which boasts more than $20 billion in assets, is also buying up distressed mortgages and is also pumping the mortgages it buys to its own captive servicing operation, Phoenix-based Marix Servicing, LLC.
Cheers,Harry,Panama property
July 24th, 2009 at 2:01 am
Wow that is a wonderful idea and great information. |I am sure that this will stop foreclosure.