WSJ not surprising CFC

Wall Street Journal

Existing-home sales fell for the sixth month in a row during January as consumers stood on the sidelines watching prices slide for property.

Home resales fell to a 4.89 million annual rate, a 0.4% decrease from December's revised 4.91 million annual pace, the National Association of Realtors said Monday. Originally, the NAR estimated sales at 4.89 million in December.
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The median home price was $201,100 in January, down 4.6% from $210,900 in January 2007. The median price in December was $207,000. Falling prices have kept would-be buyers from signing off on property as they wait in hope for still-lower price tags.

"Inventories are high, so it's not surprising prices are declining," NAR economist Lawrence Yun said.

Lenders have tightened their standards on home loans, contributing to the credit crunch that is restraining the U.S. economy. Those tighter standards have priced marginal buyers out of the market and made purchasing more difficult and costly for prime borrowers.

"Subprime loan and other risky mortgage products have virtually disappeared from the marketplace, and over the past five months, this has been reflected in soft but fairly stable home sales," Mr. Yun said.

The January resales level was above Wall Street expectations of a 4.81 million sales rate for previously owned homes.

The average 30-year mortgage rate was 5.76% in January, down from 6.10% in December, according to Freddie Mac.

Inventories of homes increased 5.5% at the end of January to 4.19 million available for sale, which represented a 10.3-month supply at the current sales pace. There was a 9.7-month supply at the end of December, revised from a previously estimated 9.6 months.

Regionally, existing-home sales in January were mixed. Sales fell 3.6% in the Northeast, 2.1% in the West, and 0.5% in the South. Demand rose 3.4% in the Midwest.

Countrywide Financial Corp., reacting to negative publicity, canceled plans to host a posh ski trip for about 30 mortgage bankers at the Ritz-Carlton Bachelor Gulch ski resort in Avon, Colo., a spokesman said.

The New York Times first reported the cancellation of the trip earlier today. Plans for the trip were first reported by The Wall Street Journal last week.

The cancellation comes as Countrywide tries to damp down widespread criticism of its lending practices, which have led to a surge of foreclosures. The company's chief executive, Angelo Mozilo, is due to appear Thursday at a hearing of the U.S. House Oversight and Government Reform Committee, chaired by California Democrat Henry Waxman, who is raising questions about compensation packages for top executives of companies involved in the mortgage crisis.

The list price for a regular room on a weekday night at the Ritz in Avon starts at $750. But the Countrywide spokesman said the company would have paid "much less" than that.

The three-night event – for smaller mortgage banks known as "correspondents" that sell home loans to Countrywide – was to include two four-hour business meetings along with skiing and dinner at upscale restaurants, including the Spago restaurant, whose menu includes Kobe steak with wasabi potato puree for $105.

While many companies entertain business partners in luxurious settings, the Countrywide event was notable because of the company's circumstances. Countrywide's board agreed last month to sell to Bank of America Corp. for about $4 billion, less than a fifth of its market value 12 months earlier.

Rising defaults and falling home prices led to losses of about $1.6 billion at Countrywide in the second half, and the company has reduced its work force by 11,400, or 19%, since July. Countrywide's servicing arm, which collects payments and handles other administrative tasks, has about 90,000 loans in foreclosure, or 1% of the total.

Sen. Charles Schumer, a New York Democrat who has been pushing Countrywide and others to do more for people facing foreclosure, denounced the planned ski outing last week. "Let me get this straight: Countrywide is too cash-strapped to prevent layoffs, refinance borrowers or ward off bankruptcy without help from Bank of America, but it can afford a posh junket for its co-conspirators in the subprime mess?" Sen. Schumer said in a written statement. "This brings new meaning to 'snow job.' "

The senator called on Countrywide to "call off this shameful ski getaway and put all [the] company's resources into refinancing the borrowers Countrywide took advantage of."

The company has argued in recent press releases that it is making strenuous efforts to keep distressed borrowers in their homes. Among those efforts are agreements with nonprofit consumer-advocacy groups to negotiate loan workouts for borrowers faced with foreclosure.

Andrew "Drew" Gissinger III, Countrywide's executive managing director, residential lending, was to have been among the hosts of the ski trip. Mr. Gissinger, who was an offensive lineman for the San Diego Chargers pro football team in the 1980s, is known for a gung-ho attitude, even when the chips are down. In a memo to staff last fall, Mr. Gissinger urged employees to hang in there despite the current slump: "I've made a lot of people rich or richer who have joined me on my past crusades.''

The correspondent lenders account for a big portion of Countrywide'sbusiness. In last year's first nine months, Countrywide bought about $151 billion of home loans originated by hundreds of correspondents across the country. In the same period, Countrywide originated $173 billion of loans through brokers and its own employees.

With the industry in turmoil and many small lenders going bust, Countrywide may feel the need to cheer up the correspondents. Some such lenders say it has become very difficult to sell their loans to Countrywide because the company has grown much pickier and is rejecting as overly optimistic more of the appraisals that back those loans.

An agenda for the canceled meeting noted that falling house prices and "skyrocketing delinquencies" have created a "new world" in which "loans are being examined with the utmost scrutiny." The agenda said participants were to discuss quality control, among other topics