Countrywide Seeks New Regulator

Countrywide, one of the largest financial services companies in the world, recently announced that it would be seeking a new regulator.

Currently, Countrywide Bank with nearly $100 billion in assets, is a  national bank regulated by the Office of the Comptroller of the Currency (OCC). Countrywide Financial, which owns Countrywide Home Loans and Full Spectrum Lending, is a bank holding company regulated by the Federal Reserve. But now, Countrywide is seeking a thrift charter so that all of
its operations will be regulated by a new regulator, the Office of Thrift Supervision (OTS).

CRC has the following concerns:

   * Countrywide accepts NO CRA responsibility to engage in community
     reinvestment activity in California. None. This is so even though
     Countrywide Bank is one of the largest banks, and has many
     branches and customers in California.

   * Countrywide is a major subprime mortgage lender. A few years ago,
     the LA Times uncovered an internal memo from a Countrywide manager
     urging Countrywide loan officers to sell consumers more costly
     loans than they could qualify for.

   * Countrywide is a major seller of nontraditional mortgage products
     like option ARMs and interest only loans. These products are not
     well understood by many consumers and can lead to borrowers owing
     more money than they initially borrowered.

   * This is another example of the problem with the bank regulatory
     structure, where banks choose who will supervise them. The
     American Banker trade publication noted that Countrywide may be
     "aiming for a more streamlined, and what some say is a more
     tolerant, regulatory structure." Banks should not be allowed to
     shop for the regulator with the least concern for protecting
     consumers. In preliminary CRC analysis of the 2005 HMDA home
     lending data, OTS regulated lenders were most likely to have large
     disparities in subprime or higher cost mortgage lending to people
     and neighborhoods of color in the state.

Countrywide is expected to apply for a thrift charter in December, the holiday month and the most popular month for bank applications. CRC will be monitoring these applications.