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Countrywide, IndyMac Shut Out by Warehouser

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Mortgage Daily

                                                 January 10, 2008

A Texas-based provider of warehouse lines is removing Countrywide Home Loans and IndyMac Bank from its approved investor list because movement in their share prices resembles that of other imploded lenders.

Southwest Securities FSB made the disclosure in a message to customers yesterday.

“Regretfully, Southwest Securities, FSB is preparing to remove Countrywide Home Loans and IndyMac Bank from our approved investor list,” according to the message, reviewed by MortgageDaily.com. “It is not our intention to disrupt your production pipeline, but we are earnest in our desire to reduce our exposure from these two investors.”

Funding requests with interest rate locks through Jan. 11 will continue to be accepted, the memo said. However, Southwest “strongly encouraged” customers to obtain other “DU/LP” approvals in addition to automated approvals from the two companies.

The move was made in light of movements in the share prices of the two companies, David Frase, executive vice president, told MortgageDaily.com in a telephone interview.

“We started to believe that the stock price is mimicking the movements of some of the other lenders that imploded,” he said. “So we felt like having a customer on our approved list is akin to endorsing that investor, and we felt like that was not appropriate given the movement of their stock price.”

Shares of Calabasas, Calif.-based Countrywide, currently trading just above $5, had traded as high as $45 a year ago. Shares of Pasadena, Calif.-based IndyMac currently trade at less than $5, a far cry from nearly $44 in June.

Frase noted that the majority of loans Southwest funds are conforming and FHA, which are marketable elsewhere.

But “in an investor shut down scenario, it’s very difficult for us to get control of our collateral and get it redirected to a new investor without a lot of time and expense for us and our customers,” he continued. “So it felt like the prudent thing to do would be for us to reduce our exposure to those two investors — at least for now.”

The warehouse lender, based in Arlington, Texas, said it will begin an aggressive review of loan commitments from Countrywide and IndyMac. Lines offered at the company go up to $20 million.

“We regret the inconvenience this policy change will cause, but we believe it is in the best interests of all of us to take this new stance,” yesterday’s memo stated.

Neither Countrywide nor IndyMac immediately responded to a request for a statement.

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