Countrywide On Brink Of Losing Lending License In Washington State

In the latest of what seems like bad report after bad report for Countrywide, now Governor Chris Gregoire of Washington state is looking to revoke Countrywide’s lending license in the state. Charges were filed June 23 by the DFI accusing Countrywide of unfair dealings with minorities in addition to $5 million of assessments the state says the company short-changed them. Countrywide now has 20 days to respond to the charges and request a hearing, according to a blog post from the Seattle Post-Intelligencer.

This matter is increasingly complicated considering that Countrywide is set to be acquired by Bank of America. However, according to the blog post from the Seattle PI, Gregoire is planning to see these charges through regardless of the takeover. Considering that other states, such as California and Illinois, are also working on lawsuits against Countrywide, if I were Bank of America, I certainly would not be feeling too good about the acquisition right now, and would be looking for an out.

Beyond the Bank of America ordeal, the larger underlying factor that needs to be considered is whether or not these states are looking at serious unintended consequences by revoking Countrywide’s license since Countrywide is one of the largest home lenders in the nation, and in fact largest lender in some markets. With today’s tightening credit markets, acquiring a loan to buy a home is getting harder and harder--now take out the top lender and just think how things may become.

Last August I put one of my houses, which happened to be a prime candidate for a knock-down and rebuild, on the market in Bellevue, Wash. During the process of selling the home, I had three different deals fall through because of financing, specifically the inability of the buyers to acquire the necessary construction financing. It turns out that the lenders they were working with kept closing up shop (or at least closing the construction lending side of their business) in the middle of their loans; in the end the only lender left doing construction loans in the area was Countrywide. Needless to say, they were pretty busy--so busy in fact that the last buyer’s loan rep said they would be lucky to get into underwriting within 30 days after submission, even with a full package. In the end I decided to sell the house to an investor who wanted to keep the home as a rental. I lost a few grand off what the builders were willing to pay, but the deal got done. I’m not sure if it would have got done through Countrywide or not, but I do know that without Countrywide, there wouldn’t have been anyone even willing to do the construction loan (at least according to these loan reps I spoke with). So that is one example of how Washington real estate may be impacted by the loss of Countrywide as a lender, and of course construction loans are just one of the loan types they offer.