Mozilo Turns Bearish on Housing Recovery
Few people have profited from the housing finance industry more than Countrywide Chairman Angelo Mozilo. And traditionally, the long-time CEO has struck an optimistic note about market prospects.
But recently, Mr. Mozilo has turned cautious, if not downright pessimistic. In a conference call with investors and analysts last week, he said he expects the second half of this year to be "increasingly challenging" not only for Countrywide, but for the entire mortgage industry.
And while many economists expect the housing downturn to end later this year or early next, Mr. Mozilo doesn't see a turnaround until 2009. And he suggested that the depth of the housing slump may be the worst since the Great Depression.
"It just takes a long time to turn a battle ship around, and this is a huge battle ship and it's headed in the wrong direction," he said.
Mr. Mozilo said he expects the downturn to continue in the second half of this year, and that 2008 will be a period of transition before business picks up again in 2009. He expects interest rates to be lower in 2009 than today, predicting that the prolonged housing slowdown may weigh on the broad economy more than some experts anticipate.
Problems are not limited to the subprime sector, he said. And Mr. Mozilo offered no assurance that the credit problems plaguing subprime loans couldn't seep into the alt-A and prime sectors, noting that there are varying definitions of where subprime ends and alt-A and prime begin. Already, Countrywide has seen significant credit quality deterioration in its prime home equity business.
As home values slip in many markets and lenders tighten underwriting standards, it becomes more difficult for troubled borrowers to refinance out of problem, he said. (c) 2007 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.bondbuyer.com/ http://www.sourcemedia.com/