BOA and Operational Risk

Implications: Over valued versus the risk of litigation, talent flight, legislative constraints, portfolio loss and about every other imaginable variable. Overvalued servicing rights with disappointed servicing investors. Average industry systems, nothing great. Short staffed already. More leaving. Mozillio defineltly a liability and not an asset.

Analysis: At a real value of 75 bp not 150 bp the servicing is valued at about $ 9B, versus the $6 B invested. The question is how much of that will be relaized and what other losses and expenses will go against it. The risk of litigation and legislation is high. Suits have already been filed and will continue to be filed. When you are the biggest, you are also the biggest target.

The servicing rights are heavily dependent on the investors continuing to keep loans with Countrywide. There is a very high sentiment in the industry that countrywide is doing a poor job of servicing others loans. I know from several investors that they are not happy and talking about pulling their loans.

The systems are not that great, they have been blended from acquisitions and are the industry norm. The CIO just announced that he was leaving and going to FIS. I know their phone system for loss mit does not allow the extensions of the loss mit personnel to be put in to reach back to the person handling the borrowers case. You first have to go through someone who screens the calls and verifies info then they send an internal message to reach the person who then tries to call you back at some point. A nice game of tag.  No wonder this huge company did so few modifications in the first 9 months of the year.

There is an estimate from the open position rec.s that Countrywide is over 1,000 employees short staffed right now at its various centers.

Finally, Angelo Mozillio is not a benefit. He will be the source of many suits and his actions and lending standards were definetly a major contributor to the mess we are in now. I know many industry servicing professionals that have no use for him and his products and would not mind seeing him prosecuted for predatory loans and servicing. His greed ( and if not greed incompetance) is a major sponsor for the mess the industry is in now.