Reader Uncovers 1998 Countrywide Loan Purchase Agreement Showing “Loan” was actually Securities transaction

THE MANUAL: I have heard about the MANUAL from several sources but never seen it. This reminds me of another banking practice where the national and regional credit and debit card networks refer to the rules and regulations governing electronic payments and ATM transactions only nobody has the rules or regulations, even the member banks who “join” to have their customers able to access the networks. DISCOVERY: A major effort should be made requiring the production of all versions of the manual in each case for each servicer/buyer/successor/transferee on each LOAN PURCHASE AGREEMENT.
ORIGINATION: New meaning as far back as 1998. Whereas it once meant the lender who was the loan underwriter who was the source of funding on the loan, it now means a conduit through which some things flow and other things don’t. For purposes of the LOAN PURCHASE AGREEMENT the lender is Countrywide because the assignment is to be recorded at the same time as the rest of the closing documents are recorded. E-LOAN is simply a broker acting like a lender. With virtually no assets, no ability to fund any loan and no ability to answer a defense, affirmative defense, counterclaim or  judgment, the intention to provide a shell that insulates the real players from liability for fraudulent “loan” practices (which actually are loan practices but rather fraudulent issuance of unregulated securities, see below).
RATE SHEET FOR SPOT COMMITMENTS: This is where the rubber meets the road. This is the point of variance where the trajectory changes. This is where the funding of the “sale” of the loan begins to grow from the funding of the “loan” itself. That growth represents add-on fees and profits never disclosed to the borrower contrary to the requirements of Federal law.
ACTUAL KNOWLEDGE OF INSTITUTIONAL INVESTORS PUTTING UP THE MONEY TO BUY THESE LOANS AND COMMITMENT BY SELLER TO ASSURE THAT AN INVESTOR WILL NOT REGARD THIS AS AN UNACCEPTABLE INVESTMENT: Proof positive that this was a securities transaction from start to finish.  The execution of the note was the execution of a non-negotiable instrument that was sold. Since it was sold under separate contract (LOAN PURCHASE Agreement plus all the securitization steps leading up to the investor) and NOT pursuant to UCC 3 or UCC 9, the borrower’s obligation is extinguished by payment from Countrywide. Since the borrower was not a party to the new contract between E-Loan and Countrywide, Countrywide has acquired, at best, a right to bring an action for equitable relief against the homeowner seeking relief or unjust enrichment, or resulting or constructive trust. But this is apart from the original obligation, the note that was evidence of the obligation and the security instrument (mortgage/beneficial interest) that was originally executed and which is now a cloud (but not an encumbrance) on the title of the homeowner. An obligation from the borrower still exists but it does NOT exist under UCC as evidenced by the note and it is not secured by the mortgage/beneficial interest. While Countrywide has purchased something, however, it is already disclosed that it is doing so on behalf of investors who really don’t know the truth about what is going on. So both the borrower and the investor, the only true parties to the intended transaction, are separated by a veil of secrecy. So Countrywide can’t assert the equitable claim. That is reserved only to a party with standing — which is the party that actually lost money.
UNDERWRITING ACTUALLY TO BE DONE BY COUNTRYWIDE CONTRARY TO DISCLOSURES AT CLOSING : SELLER required to use a Countrywide-approved automated underwriting system for underwriting theLoan.


Only those Loans fully complying with the standards for Conforming
Conventional, Jumbo Conventional, Government and Second Mortgage Loan
Programs set forth in the Mortgage Programs section of the Manual are
eligible for purchase under this Agreement. Seller must be approved,
qualified and/or licensed to originate such Loans.

5. Purchase Price. The purchase price of each Subprime Loan shall be
calculated by multiplying the unpaid principal balance of each Subprime Loan
(as adjusted for the borrower’s next payment) on the Closing Date by its
applicable purchase price percentage calculated in accordance with the rate
sheet at the time of purchase for “Spot” Commitments, or as stated in the
Commitment letter for “Pool” Commitments (the “PURCHASE PRICE”). If a
borrower’s payment is due 15 days or earlier after the Closing Date (an “Early
Payment”), the portion of such payment attributable to principal shall be
deducted from the unpaid principal balance for calculating the Purchase Price.
Seller shall then retain borrower’s Early Payment when made. The purchase
proceeds paid by Countrywide to Seller shall consist of the Purchase Price plus
accrued interest as of the Closing Date and less (i) any positive escrow
balances, and (ii) any amounts actually owed and paid by Seller for Mortgage
Loan tax service contracts and flood certification determinations which are
transferable and transferred to Countrywide on the Closing Date. Without
limitation on Countrywide’s other rights herein, the Purchase Price is subject
to change if it is determined that the loan characteristics of the Subprime
Loan to be purchased differ from the characteristics represented on the
Mortgage Loan Schedule.

Seller has no knowledge of any circumstances or conditions with
respect to any Loan, mortgaged property, trustor/mortgagor or
trustor’s/mortgagor’s credit standing that reasonably could be
expected to cause private institutional investors to regard any
Loan as an unacceptable investment, cause any Loan to become
delinquent or adversely affect the value or marketability of the

(17)  All documents submitted are genuine. All other representations as
to each such Loan are true and correct and meet the requirements
and specifications of all parts of this Agreement and the Manual.

Seller will record the corporate assignment in the name of
Countrywide Home Loans, Inc., at the time the deed of
trust/mortgage is recorded, and the assignment of the Loan from
Seller to Countrywide shall be valid and enforceable.

All federal and state laws, rules and regulations applicable to
the mortgage Loans have been complied with, including but not
limited to: the Real Estate Settlement Procedures Act, the Flood
Disaster Protection Act, the Federal Consumer Credit Protection
Act including the Truth-in-Lending and Equal Credit Opportunity
Acts, and all applicable statutes or regulations governing fraud,
lack of consideration, unconscionability, consumer credit
transactions or interest charges.

A. Countrywide shall have the right, but not the obligation, to underwrite
any Loan submitted for purchase pursuant to this Agreement, or
otherwise insure that any Loan submitted for purchase complies with all
terms and conditions of this Agreement and the Manual; provided that
neither the existence nor the exercise of this right shall affect in
any way Seller’s obligations hereunder, including without limitation,
Seller’s repurchase obligations under Section 7 hereof and Seller’s
hold harmless obligations under Section 9 hereof. The applicable
procedures are set forth in the Prior Approval section of the Manual.

B. Seller shall deliver to Countrywide an appraisal of the real estate
security for each such Loan, signed by a qualified appraiser, as
defined in the Manual, prior to Countrywide’s approval to purchase such

Seller shall fully underwrite each Loan prior to submission to
Countrywide in accordance with Underwriting Guidelines and Lending
Requirements sections of the Manual, or, if available, use a
Countrywide-approved automated underwriting system for underwriting the

5 Responses

  1. […] Loan Calculator "Countrywide Loan Calculator" image from:… "Countrywide Loan Calculator" on […]

  2. Has anyone heard of this deal being offered???

    CountryWide wants to make a deal with us.

    State your price and we’ll throw in an additional 20% off – what’s this a mortgage red-tag sale or something – what’s up with this… deal???

    No-Kidding – Here’s the deal!

    All we need to do is get a licensed real estate agent to give us a price of what our house would sell for today – on a SHORT SALE – then have them write that on their real estate letterhead and send it in.

    CountryWide will take give us an ADDITIONAL 20%-OFF that estimate – refinance the entire loan – all DONE! No questions asked – no fees – no nothing!

    So, we have a million dollar note – I say – but our house is not even worth 600k. NO PROBLEM – if it were 600k then they’d simply deduct an ADDITIONAL 120k (20%) and our NEW mortgage would be 480k. They DID NOT EVEN FLINCH! When can I get the letter to them…? What’s that smell – anyone smell something or is it… hey, wait a minute – is this some prank call? NOPE that’s the deal they are offering us?

    What’s wrong with that picture? CountryWide is willing to walk away from 520k just because of a letter from a realtor says so…? I think someone at CountryWide didn’t change their bong-water enough – something is WRONG with that picture… guilty conscience maybe…

    Has anyone else heard of this?


  3. From the SEC website:

    [they knew the loans they were pushing were toxic]

    Excerpts of E-Mails From Angelo Mozilo
    Sept. 26, 2006 — following up a meeting with Sambol the previous day about the Pay-Option ARM loan portfolio:

    We have no way, with any reasonable certainty, to assess the real risk of holding these loans on our balance sheet. The only history we can look to is that of World Savings however their portfolio was fundamentally different than ours in that their focus was equity and our focus is fico. In my judgement [sic], as a long time lender, I would always trade off fico for equity. The bottom line is that we are flying blind on how these loans will perform in a stressed environment of higher unemployment, reduced values and slowing home sales.

    … pay options are currently mispriced in the secondary market, and that spread could disappear quickly if there is an foreseen [sic] headline event such as another lender getting into deep trouble with this product or because of negative investor occurance [sic].

    “timing is right” … to … “sell all newly originated pay options and begin rolling off the bank balance sheet, in an orderly manner, pay options currently in their port[folio].”

    April 17, 2006 — to Sambol concerning Countrywide’s subprime 80/20 loans:

    In all my years in the business I have never seen a more toxic prduct [sic]. It’s not only subordinated to the first, but the first is subprime. In addition, the FICOs are below 600, below 500 and some below 400[.] With real estate values coming down…the product will become increasingly worse. There has [sic] to be major changes in this program, including substantial increases in the minimum FICO. … Whether you consider the business milk or not, I am prepared to go without milk irrespective of the consequences to our production.

    April 13, 2006 — to Sambol, Sieracki, and others to address issues relating to the 100 percent subprime second business in light of the losses associated with the HSBC buyback:

    Loans had been originated … “through our channels with disregard for process [and] compliance with guidelines.”

    He “personally observed a serious lack of compliance within our origination system as it relates to documentation and generally a deterioration in the quality of loans originated versus the pricing of those loan [sic].”

    “[i]n my conversations with Sambol he calls the 100% sub prime seconds as the ‘milk’ of the business. Frankly, I consider that product line to be the poison of ours.”

    On March 28, 2006 — to Sambol and others:

    Directed them to implement a series of corrective measures to “avoid the errors of both judgment and protocol that have led to the issues that we face today caused by the buybacks mandated by HSBC.” …

    … The 100% loan-to-value subprime product is “the most dangerous product in existence and there can be nothing more toxic and therefore requires that no deviation from guidelines be permitted irrespective of the circumstances.”

  4. Produce the note strategy is working in San Jose CA:

  5. This is very interesting…Fannie Mae funded many of the loans originated by Countrywide. Anyone who has a Countrywide loan can call Fannie Mae and they will tell you whether your loan is one of theirs. If it is one of theirs, you can ask the date that it was acquired by Fannie Mae. In one case that I inquired, the date of acquisition actually preceded the date of the closing. So, in these cases, Countrywide is the wrong Plaintiff.

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