An interesting story over at Financial Week looks at the impact of Countrywide's quiet move from a national bank charter to federal thrift:
With Countrywide chairman and CEO Angelo Mozilo describing the ongoing decline in housing prices as the worst he's seen in decades, the bank-turned-thrift's survival may depend on friendlier regulation ... ... Countrywide's recent conversion from national bank charter to federal thrift means easier supervision by the Office of Thrift Supervision, as it imposes less stringent capital reserve requirements than Countrywide's former masters, the Federal Reserve and Office of the Comptroller of the Currency.
Underscoring how regulation can impact a lender's operations, the story offers up a signficant example:
Under regulation by the Federal Reserve and the OCC, for instance, Countrywide had to take an immediate charge after easing the terms on an existing loan. Not so under the OTS if it can be convinced that the collateral is still strong. Countrywide said it modified terms on about 2,000 loans in June, roughly double the prior year's monthly level, mostly to delay foreclosures and avoid heavier losses. But thanks to its new overseer, if prices keep falling and foreclosures continue, it's possible that Countrywide could ease the terms on future loans without its results being hurt as much as they have been under the OCC's rules.
As the subprime mess trudges onward and becomes a larger mortgage industry mess -- seemingly a foregone conclusion at this point -- the potential for change in the regulatory landscape looms large for any industry player with long-term interests in mortgage banking. In fact, sources have suggested to me in confidence that, particuarly for subprime lending, new regulations are likely to "rewrite the rules of the game" for many industry participants. Countrywide's move to a thrift seems to suggest it's doing what it can to ensure that it sits in as sweet a spot as possible insofar as any regulatory impact. Funny thing is, I can recall not too long ago when lenders were actively ditching their thrift charters because they were seen as a competitive liability during the housing boom.