Outcome: Omitted by SEC
Whereas the problems resulting from poor subprime lending safeguards are having negative impacts on our company, millions of homeowners, our national economy, and global financial markets.
Subprime borrowers in adjustable rate mortgages may face unaffordable loan payments following rate resets, resulting in payment delinquency, foreclosure proceedings, and the loss of homes, negatively affecting communities, borrowers’ credit ratings, and their ability to purchase a home in the future.
Subprime adjustable rate mortgages worth almost $600 billion are expected to experience rate resets by the end of 2008.
Credit Suisse predicts that between August 2007 and July 2009, one million subprime mortgages worth $190 billion will start or continue going through foreclosure. Seventy-five percent of those, or 775,000 homes, will eventually default and be liquidated.
Loan modification strategies may be employed by lenders to adjust the terms of existing mortgages, which can forestall delinquency and foreclosure and result in increased home retention and community stability and mitigate the harmful impacts on the economy.
Treasury Secretary Paulson has said, “…foreclosures take place that aren’t in the investors’ interest, aren’t in the homeowners’ interest, aren’t in the community’s interest and aren’t in the economy’s interest.”
Sheila Bair, Chairman of the Federal Deposit Insurance Corporation, has stated that “…to foreclose on all of these properties is not a good option for anybody.” Ms. Bair encourages converting the loans into fixed rate mortgages at the starter rates.
Fitch Ratings believes that loan modifications “could be the only viable loss mitigation strategy for as much as 40%-50% of the loans in default or determined to be a reasonably foreseeable default scenario.”
Our company is one of the nation’s largest lenders and servicers of subprime mortgages. At the end of September 2007, Countrywide’s servicing portfolio included over $118 billion of subprime loans.
The shareholders urge the Board of Directors to submit, at reasonable cost and omitting any proprietary information, a report to the shareholders by Sept. 30, 2008 on the implications of subprime adjustable rate mortgage resets on the ability of customers to pay their notes.
Shareholders recommend that the report include the number of at-risk borrowers in our company’s subprime servicing portfolio, our company’s definition of “at-risk”, and a discussion of how many borrowers take advantage of our company’s refinance and modification programs.