Californians Clamor to Cash Out from Countrywide
8:08 am in Banking in California Southbay, Businesses, Current Events, Real Estate, Services by Jane in Redondo
Uh oh… customers who hear rumors of Countrywide Bank becoming unstable are rushing to withdraw their savings, even as Countrywide Bank’s parent company, Countrywide Financial, is rushing to reassure its customers that the bank is safe. The Los Angeles times reported on this on Friday. Countrywide savings customers are afraid that a potential flood of defaults on jumbo loans that Countrywide has been issuing may corrupt the stability of the bank, and affecting their savings. One customer said he didn’t care if the bank was FDIC insured, he wanted to get his half million dollars ($500,000) in savings out and into another bank.
From AJC website:
Californians rush to pull money from Countrywide Bank
Parent of home loan company assures that bank is stable
By E. Scott Reckard and Annette Haddad
LA Times
Published on: 08/17/07LOS ANGELES — Anxious customers jammed the phone lines and Web site of Countrywide Bank and crowded its branch offices to pull out their savings because of concerns about the financial problems of the mortgage lender that owns the bank.
Countrywide Financial Corp., the biggest home-loan company in the United States, sought Thursday to assure depositors and the financial industry that both it and its bank were fiscally stable. And federal regulators said they weren’t alarmed by the volume of withdrawals from the bank.
The mortgage lender said it would further tighten its loan standards and make fewer large mortgages. Those moves could make it harder to get a home loan and further depress the housing market.
The rush to withdraw money — by depositors that included a former Los Angeles Kings star hockey player and an executive of a rival home-loan company — came a day after fears arose that Countrywide Financial could file for bankruptcy protection because of a worsening credit crunch stemming from the sub-prime mortgage meltdown.
The parent firm borrowed $11.5 billion Thursday by using up an existing line of credit from 40 banks, saying the money would help the lender meet its funding needs and continue to grow. But stock investors, apparently alarmed that the company felt compelled to use the credit line, sent Countrywide’s already battered stock down an additional 11 percent.
At Countrywide Bank offices, in a scene rare since the U.S. savings-and-loan crisis ended in the early ’90s, so many people showed up to take out some or all of their money that in some cases they had to leave their names.
In west Los Angeles, a Countrywide supervisor brought in from another office served coffee to more than 25 people waiting calmly for their turn with the one clerk who could help them.
Bill Ashmore drove his Porsche Cayenne to Countrywide’s Laguna Niguel office and waited half an hour to cash out $500,000, which he then wired to an account at Bank of America.
“It’s because of the fear of the bankruptcy,” said Ashmore, president of Irvine’s Impac Mortgage Holdings, which escaped bankruptcy itself recently by shutting down virtually all its lending and laying off hundreds of employees.
“It’s got my wife totally freaked out,” he said. “I just don’t want to deal with it. I don’t care about losing 90 days’ interest, I don’t care if it’s FDIC-insured — I just want it out.”
Customers, most of whom said they were acting just in case, said they went to the lightly staffed branches because they couldn’t get through to the bank via its toll-free number or its slow-moving Web site.
“I doubt it will go under, but I want to protect myself,” said Rogie Vachon, who was the Kings’ most valuable player for several years in the ’70s. Vachon said he went to the west Los Angeles branch to withdraw some money because his account balance exceeded the limit on insurance provided by the Federal Deposit Insurance Corp.
In a statement, the bank said: “It is very important to remember that Countrywide Bank is well capitalized, with FDIC-insured deposits, and is one of the largest banks in the United States, with assets over $107 billion.” The bank added that it had significant access to outside capital and was still highly rated by debt-rating firms.
As for parent firm Countrywide Financial, the mortgage giant said draining its credit line would allow it to continue operations while refocusing its business on the “plain vanilla” mortgage loans that can be sold to Fannie Mae and Freddie Mac, the government-sponsored mortgage finance companies.
Countrywide said it planned to fund more mortgages through Countrywide Bank and have the bank invest in certain loans that Fannie Mae and Freddie Mac won’t buy, such as “jumbo” mortgages, which in California are defined as those over $417,000.
Countrywide recently was funding about $40 billion a month in mortgages. Of those, about half qualified to be sold to Freddie Mac or Fannie Mae, and half were “nonconforming” loans the agencies don’t buy, including sub-prime mortgages to higher-risk borrowers as well as jumbo loans, which account for 43 percent of all mortgages issued in Southern California.
Company executives declined to discuss how the heavy withdrawals at Countrywide Bank branches Thursday might interfere with that strategy.
Times staff writer Andrea Chang contributed to this report.
Really absurd that folks would think their FDIC insured money would be at risk. But then, these are probably the same poepl who signed up for 2/28s & other products without realizing the full ramifications.
Keith,
I think people tend to act from a knee jerk reaction around their money, regardless of assurances about whether their life savings would be FDIC insured or not.
These may not be the same who signed up for products that carry inherent risk; in fact, those who pull their money out from CW are fearing the consequences of the actions of those who jump into products for short term gain and without a long term plan.
Jane