What Is Countrywide?

1162 Words5 Pages
According to Gamble, J. & Thompson A. (2011), Countrywide Financial Corporation was formed in 1969 under the leadership of Angelo Mozilo. The goal of the company was to be the largest lender for real estate loans in the United States. The strategy was successful for a few years, but was ultimately doomed for failure due to very poor business practices. The detailed strategy was for Countrywide to be involved in five different segments of the banking business. The first and most important component of Countrywide was mortgage banking. They originated, purchased, and sold mortgage loans all across the country. The second component was banking. They used customer deposits to fund the mortgage loans, and home equity lines of credit. The third component…show more content…
One of their main strengths’ was their name recognition. Anyone who was thinking about buying a house, or maybe refinancing one, knew who Countrywide was. Name recognition is always important to a company. Another area of strength was that in the early years they were very strong financially which is always important. It allows companies to implement new ideas; therefore, if one of them fails, it will not bring the entire company down. They definitely grew the business over the years. In addition, their customer service was amongst the best. I know this from personal experience, because I financed a house through them. They were very easy to work with, and always answered my questions so that I would understand the…show more content…
The federal government encouraged lenders to make home ownership more available to more Americans. The result was a subprime mortgage market. There were three particular problems with the subprime mortgage market. The first is the ability of the borrower to get a loan with a low credit score. A low credit score is a problem, because it indicates that the borrower has had problems repaying loans in the past. The second issue is that it allowed borrowers the chance to buy a house with little or no down payment. The problem with the borrower not having a down payment was two-fold. First it showed the lack of ability of the borrower to save, and second it left little room for error for the lender. If the borrower defaulted, then the lender was stuck with a house with little or no equity. The third issue was the debt-to-income ratio. Those borrowers with poor debt-to-income ratio’s had less left to pay for other needed items, such as food, transportation expenses, and utilities. Another threat that Countrywide faced was that there were many banking institutions for borrowers to get their loans from. Those companies were also allowed to use the subprime mortgage market, but most of them had better leadership, and used much better business

More about What Is Countrywide?

Open Document