Ex-Countrywide Chief Forms Mortgage Buyout Firm
RENEE MONTAGNE, Host:
NPR's Chris Arnold reports.
CHRIS ARNOLD: In the dark depths of the sea, bottom-feeders glide through the water, gobbling up scraps that other fish won't bother with or don't have the stomach for. The same principle is at work in the mortgage business these days. One new bottom-feeder is called PennyMac, and it's looking to snap up gnarly looking loans for pennies on the dollar.
MONTAGNE: There are loans, for example, the worst of what we've seen, second mortgages that are trading, you know, five cents on the dollar.
ARNOLD: Stan Kurland is the former president of Countrywide and now the CEO of PennyMac. He says even some loans where the borrowers have decent credit can be bought at a big discount right now. In some cases, the homeowners' subprime loan payments are about to jump way up, or some homeowners just put zero money down and now find their houses aren't worth what they owe.
MONTAGNE: People who are fully able to pay, but when they've lost all of their equity or they're underwater in the property, there are many people that just want to walk away. And those are people that we want to deal with.
ARNOLD: But some consumer advocates are skeptical. Bruce Marks is the head of the Neighborhood Assistance Corporation of America, or NACA. He doesn't like that PennyMac founders came out of Countrywide, an aggressive subprime lender.
MONTAGNE: These are the same people that created a problem and profited from the problem. And the fact of the matter is, we can't trust them. We are very suspicious, and we are very concerned that they're about there just to prey on hardworking people and make money.
ARNOLD: Marks thinks these bottom-feeders - or they're also called bottom- fishers - just want to string along homeowners until the market comes back and their property values increase.
MONTAGNE: Sit on these mortgages, and then they'll foreclose and throw the homeowners out of their homes.
ARNOLD: Kurland denies that. He says in many cases, for people at risk of foreclosure, it's more profitable to just modify loans and make them affordable.
MONTAGNE: Absolutely. Our primary mission is to avoid foreclosure.
ARNOLD: Mark Zandi is chief economist of Moodyseconomy.com
MONTAGNE: You know, in the grand scheme of things, this is still very, very small. It's a drop in the proverbial bucket.
ARNOLD: Chip Case is a housing economist with Wellesley College. He says we're starting to see some signs that the housing slump might be leveling off. Home sales ticked up a bit last month.
P: The other sign of pending recovery and return to normalcy is bottom-fishermen. Those are people buying up the stuff that is underpriced because of the panic. And then that begins to move it back to kind of normal pricing.
ARNOLD: Chris Arnold, NPR News.
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