Countrywide Announces Strategic Agreement With Fannie Mae.
"This new strategic agreement between Fannie Mae and Countrywide is an unprecedented milestone in mortgage banking history," said Angelo R. Mozilo, chairman. "We have enjoyed and benefited from a long-standing and mutually beneficial relationship with Fannie Mae. This new agreement creates unparalleled potential through the convergence of Fannie Mae's extraordinary strategic and financial resources with Countrywide's undisputed operational leadership."
The strategic agreement contemplates efforts by Fannie Mae and Countrywide to work together to create capital structures that reduce the intensive capital demands of mortgage banking. The Alternative Servicing Compensation mortgage-backed securities (ASC MBS) product developed by Fannie Mae and recently issued by Countrywide is an initial effort to provide this flexibility. Countrywide will now be able to discretionarily reduce the capital investment required when originating loans and retaining servicing. Countrywide has customarily retained 35-40 basis points of service fee on agency-eligible loans that has resulted in a sizable balance sheet investment in capitalized servicing rights. Financial leverage historically available to Countrywide to finance that asset has been relatively low and has been a constraint on earnings growth.
By utilizing ASC MBS, Countrywide will reduce the servicing fee retained, convert a significant portion of the non-cash gain on sale into cash and reduce the associated capitalized servicing on the balance sheet. Countrywide would continue to fully retain the benefits of late and ancillary charges, escrow benefits, cross-selling profits and economy of scale benefits on costs related to servicing. This execution is initially expected to affect 25-35 percent of total fundings at Countrywide.
The strategic agreement also addresses loan products and processes. The objective is to expand markets to accommodate more customers and streamline loan processing in order to reduce the up-front cost of homeownership. This entails increased acceptance of Countrywide's proprietary CLUES underwriting technology, greater usage of short form appraisals, expansion of streamlined loan products, flow sales for expanded criteria loans, and guideline waivers.
Fannie Mae and Countrywide will also partner to broaden the distribution of products of key Countrywide subsidiaries. Loan closing services such as credit reports, appraisals, title insurance, flood determination and home inspection available through the LandSafe subsidiaries will be available to all lenders and brokers using the MORNETPlus network. Fannie Mae has also agreed to explore strategies related to the newly acquired Balboa Insurance group and Countrywide Securities Corporation, a broker-dealer subsidiary, which will now have a position in the Fannie Mae medium-term note dealer group.
"This strategic agreement empowers Fannie Mae and Countrywide to better serve homebuyers and make unprecedented progress in lowering the barriers to home ownership," Mozilo concluded. "The foundation has been set for unequaled advances in productivity, efficiency and innovation in mortgage banking. Most importantly, the strong spirit of partnership between Fannie Mae and Countrywide ensures that this agreement will soon be expanded in scope to include more unique features."
Founded in 1969, Countrywide Credit Industries, Inc. originates, purchases, securitizes, sells and services loans for single-family homes through its primary subsidiary, Countrywide Home Loans, Inc. Countrywide is headquartered in Calabasas, California and has more than 11,000 employees with more than 560 offices across the nation. For more information, visit Countrywide's website at www.countrywide.com.
Other principal subsidiaries include Full Spectrum Lending, Inc., a sub-prime residential lender; LandSafe, Inc., a provider of loan closing services; Countrywide Capital Markets, a mortgage-related investment banker; Countrywide Insurance Services, Inc., a full service insurance agency; and Countrywide Financial Services, Inc., a mutual fund manager and servicer.
Certain of the information included in this press release may contain forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties, which could cause actual results to differ materially from historical results or those anticipated due to a number of factors such as the direction of interest rates, competitive conditions, expense management and other risks detailed in documents filed by the Company with the Securities and Exchange Commission from time to time. Words like "believe", "expect", "should" and other expressions which indicate future events and trends identify forward-looking statements. The Company undertakes no obligation to publicly update or revise any forward-looking statements.
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|Date:||Jul 9, 1999|
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