Countrywide CDs

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clay
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Countrywide CDs

Post by clay »

Countrywide seems to have among the better rates on CDs right now. I have a couple coming due elsewhere that would renew at a much lower rate where they are (State Farm) than Countrywide is currently paying. And Countrywide (despite it's recent problems, which sort of scare me) is FDIC insured. Any reason not to go with them (as long as I'm under insured limits)? Are there better opportunities I should think about for CDs (this portion of my portfolio is allocated to CDs). I've seen a couple but they seem more complicated, and I don't want to buy anything I don't understand tolerably well.

Many thanks,
Happy New Year,
CS
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Rager1
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Post by Rager1 »

Hello CS,

Since Countrywide CDs are FDIC insured, the only risks you run are:

1. A potential delay in receiving your funds if Countrywide should fail.
2. If they fail, the rate you get may go down.

As long as you stay under $95,000 (to allow room for the interest) and if you are okay with those potential risks, I see no problem in going with Countrywide.

Ed
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dm200
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The Countrywide

Post by dm200 »

rates that I have seen that are most attractive are the shorter term CDs, so the risk that you won't get interest in case of failure is fairly low.
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Grandpaboys
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Post by Grandpaboys »

I agree Countywide is top of the heap and have come ever so close to getting a CD from them. I am skittish about the Bank's conditions so have held off doing anything. A six months CD for $100,000 would only net me an additional $395 over Vanguard Money Market Prime. That does not excite me very much. I have decided to wait and see what Pen-Fed comes up with in January. If there was a local Bank with similar rate I would sign up because I could deal with it directly rather than over the Internet.
Good Day | GP
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clay
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Post by clay »

Grandpaboys wrote:I agree Countywide is top of the heap and have come ever so close to getting a CD from them. I am skittish about the Bank's conditions so have held off doing anything. A six months CD for $100,000 would only net me an additional $395 over Vanguard Money Market Prime. That does not excite me very much. I have decided to wait and see what Pen-Fed comes up with in January. If there was a local Bank with similar rate I would sign up because I could deal with it directly rather than over the Internet.
Thanks, Texas GP (from an Okie to your north). What conditions worried you most? I'm locking in for about three years. Market timing, I suspect, but I would like to guarantee a portion of money at around 5% for the next few years (in three years I'll be retied but not old enough for social security), so I'm willing to take my chances on rates (to sort of balance out my chances with equities during the comparable period, about which I'm not sanguine).

CS
sscritic
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Post by sscritic »

I have money at Countrywide.

To learn more about FDIC and how failures are handled, go to the FDIC website. As I recall, in a typical takeover,

1) accounts are transferred to a new institution, usually within one day.

2) interest rates remain the same on CDs for six months.

3) you can withdraw without penalty after the transfer.

4) if your account is taken over by an institution where you already have accounts, your accounts are separately insured for six months.

My memory is sometimes faulty, so if you are concerned, contact the FDIC at the memorable address of fdic.gov
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SoonerSunDevil
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Post by SoonerSunDevil »

Grandpaboys wrote:I agree Countywide is top of the heap and have come ever so close to getting a CD from them. I am skittish about the Bank's conditions so have held off doing anything. A six months CD for $100,000 would only net me an additional $395 over Vanguard Money Market Prime. That does not excite me very much. I have decided to wait and see what Pen-Fed comes up with in January. If there was a local Bank with similar rate I would sign up because I could deal with it directly rather than over the Internet.
With all due respect, the conditions of Countrywide are irrelevant so long as you are under the FDIC Insurance limits. The additional $395 from Vanguard's Prime Money Market account assumes that the interest rate paid to shareholders of PMM does not decline. Personally, I think that rates will decline further, and I am confident to say that I know that rates will decline, remain steady, or increase :)

By the way, and I know this sounds odd, but the Countrywide CD is in theory safer than PMM if you stay under FDIC Insurance limits. While I highly, highly doubt Vanguard's PMM would ever "break the buck," money market mutual funds are NOT insured.

clay wrote:Thanks, Texas GP (from an Okie to your north). What conditions worried you most? I'm locking in for about three years. Market timing, I suspect, but I would like to guarantee a portion of money at around 5% for the next few years (in three years I'll be retied but not old enough for social security), so I'm willing to take my chances on rates (to sort of balance out my chances with equities during the comparable period, about which I'm not sanguine).

CS
If you are comfortable locking in a rate of 5% over the next three years, stay below the FDIC Insurance limits and buy the CD. Oh, and do not be nice to Longhorn fans; it is not tolerated on this board! :lol:

John
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clay
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Post by clay »

OUJohnNasr wrote: Oh, and do not be nice to Longhorn fans; it is not tolerated on this board!
John
My bad (and I live in Norman, where Longhorns are especially suspect).
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alvinsch
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Post by alvinsch »

Grandpaboys wrote:I have decided to wait and see what Pen-Fed comes up with in January.
PenFed has already come out with new rates but they aren't very good this year.

Bank Blog on PenFed
Pentagon Federal Credit Union continued its practice of raising certificate rates before the start of the new year. Unfortunately, the new higher rates aren't as good as previous years even when factoring in the new rate environment. The highest yield is 5.25% APY, but this requires a 7-year term. The 5-year term has a yield of 5.00% APY which is just 5 basis points higher than the previous 4.95% APY. The rates for the shorter terms didn't change.
- Al
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dm200
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Pentagon

Post by dm200 »

Federal's new rates look very good, as compared to the overall average yields on similar term accounts.

While lower than those of a year ago, remember that most rates were higher a year ago.

dan
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alvinsch
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Re: Pentagon

Post by alvinsch »

dm200 wrote:Federal's new rates look very good, as compared to the overall average yields on similar term accounts.

While lower than those of a year ago, remember that most rates were higher a year ago.

dan
Yes, interest rates have gone down but relative to what else is available (i.e. 5.5% for 3 and 6 month at Countrywide, 5.35% for 2 and 5 year at a CU in my state), PenFed's rates don't look very good to me. Glad I maxed out last year at 6.25% when they were very good. I don't see why "average" CD rates would be of any interest to the knowledgeable investors here who are capable of finding the best CD rates.

- Al
eight8
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countrywide cd

Post by eight8 »

For those seeking larger FDIC insurance coverage on certificates of deposits ask you bank if they participate int he CDARS program which allows your bank to offer to you up to $50,000,000 in FDIC coverage. Yes it is legal and has been accepted by all of the bank examiners. In fact the program was started by the former comptroller of the currency, Eugene Ludwick.

On the Countrywide issue...all banks with sub prime mortgage exposure whether in mortgages or backing in commercial paper are bulking up in terms of liquidity..so be careful...we have not seen the bottom of the impact of this mess.
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dm200
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Average rates

Post by dm200 »

Yes, interest rates have gone down but relative to what else is available (i.e. 5.5% for 3 and 6 month at Countrywide, 5.35% for 2 and 5 year at a CU in my state), PenFed's rates don't look very good to me. Glad I maxed out last year at 6.25% when they were very good. I don't see why "average" CD rates would be of any interest to the knowledgeable investors here who are capable of finding the best CD rates.
"average rates" for one time period to another are very relevant, when evaluating available rates. For example, when the average CD rate for 5 years is 5.00% APY, and Pentagon Federal offers 6.00% APY - then you might conclude that the 6.00% is good. At another time (say one year later), if the average CD rate is 4.00% and Pentagon Federal offers 5.00%, then you should conclude that the 5.00% is also good, and not conclude that the 5.00% is not good because it was 6.00% a year ago.

dan
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alvinsch
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Re: Average rates

Post by alvinsch »

dm200 wrote:
Yes, interest rates have gone down but relative to what else is available (i.e. 5.5% for 3 and 6 month at Countrywide, 5.35% for 2 and 5 year at a CU in my state), PenFed's rates don't look very good to me. Glad I maxed out last year at 6.25% when they were very good. I don't see why "average" CD rates would be of any interest to the knowledgeable investors here who are capable of finding the best CD rates.
"average rates" for one time period to another are very relevant, when evaluating available rates. For example, when the average CD rate for 5 years is 5.00% APY, and Pentagon Federal offers 6.00% APY - then you might conclude that the 6.00% is good. At another time (say one year later), if the average CD rate is 4.00% and Pentagon Federal offers 5.00%, then you should conclude that the 5.00% is also good, and not conclude that the 5.00% is not good because it was 6.00% a year ago.

dan
I guess I look at it differently. Average rates are totally irrelevant to me because all I care about is what's the best CD offering for me. If penfed's rates are as good as the best rates available to me then they are a good deal but if they are noticeably lower then they're not a good deal. Currently if the best deals are at say 5.25% to 5.5% then whether average national rates are 3%, 4.5% or 1% makes no difference.

Another way to look at it is if the average ER of all funds was 1.5% would you consider 1.4% to be a good deal even if a comparable Vanguard fund's ER was 0.2%?

- Al
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Grandpaboys
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Post by Grandpaboys »

Just to answer someones question, back in the eighties with the oil patch and unsecured loans the banks were taking I had to wait for my money for several weeks before I got paid, which caused a loss of interest. Also a bank in Texas went belly up which I had stock in and I lost everything. I believe it was Interfirst Bank. Even though I had FDIC insurance I still lost because of the wait to get my money.
Good Day | GP
sport
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Re: Question for eight8

Post by sport »

eight8 wrote:For those seeking larger FDIC insurance coverage on certificates of deposits ask you bank if they participate int he CDARS program which allows your bank to offer to you up to $50,000,000 in FDIC coverage. Yes it is legal and has been accepted by all of the bank examiners. In fact the program was started by the former comptroller of the currency, Eugene Ludwick.

On the Countrywide issue...all banks with sub prime mortgage exposure whether in mortgages or backing in commercial paper are bulking up in terms of liquidity..so be careful...we have not seen the bottom of the impact of this mess.
Hi eight8,
Can you explain more about the CDARS program? How does it work?

Jeff
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DRiP Guy
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Post by DRiP Guy »

Yup, just went to Penfed site thinking I was maybe going to move some MM funds into CDs to form a third tier of my ladder, and not gonna happen -- the usually superior year-end PenFed CD rate just isn't there this year -- 5.25% APY @ 7 year, not enough to make me move.
wedmiston
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No need to worry according to Money Magazine...

Post by wedmiston »

See pg. 22. in current issue. Deposits insured up to $100K. They can offer better rates because no tellers and overhead.
hermiston
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CD expenses

Post by hermiston »

Are there any kind of management or other expenses that you pay on a CD as you do on a fund?

hermiston
JackS
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Post by JackS »

Has any ever used the foreign currency CD products from Everband or some other institution? I believe that the Fed will continue to hurt the dollar by lowering the rate this month and maybe again and hold the rate steady for this year.

https://www.everbank.com/
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NAVigator
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Re: CD expenses

Post by NAVigator »

hermiston wrote:Are there any kind of management or other expenses that you pay on a CD as you do on a fund?

hermiston
I've never heard of any other than the "penalty for early withdrawal" loss of interest which can be substantial.

Jerry
"I was born with nothing and I have most of it left."
sscritic
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Re: CD expenses

Post by sscritic »

hermiston wrote:Are there any kind of management or other expenses that you pay on a CD as you do on a fund?

hermiston
There is a problem with your question. Every business has expenses. The bank has to pay for bricks or a website, staff, computers, accountants, etc. Accordingly, they set the interest rate they pay you so that their income covers their costs plus the interest they pay you. A mutual fund has similar expenses. Just like the bank, they pay their costs before they pay you any dividends.

So the answer to your question is either yes, you pay for the expenses of the bank and Vanguard, or no, there are no fees for owning a fund or a CD. Whatever your answer is, it is the same for both.

The famed ER is not a fee, but is an accounting of what it cost the fund to pay for bricks, staff, computers, accountants, etc. If you want to know what your bank paid, you can look at an annual report. The difference is that the fund can do it on a per share basis, but the bank does it for the whole bank as a single unit. The bank could also do it on a per share basis, but that is for stock holders, not for CD holders.
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Re: Pentagon

Post by Nitsuj »

dm200 wrote:Federal's new rates look very good, as compared to the overall average yields on similar term accounts.

While lower than those of a year ago, remember that most rates were higher a year ago.
Wow. They were at 6% in October when they were running their sale.
Nitsuj
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Post by Nitsuj »

Grandpaboys wrote:Just to answer someones question, back in the eighties with the oil patch and unsecured loans the banks were taking I had to wait for my money for several weeks before I got paid, which caused a loss of interest. Also a bank in Texas went belly up which I had stock in and I lost everything. I believe it was Interfirst Bank. Even though I had FDIC insurance I still lost because of the wait to get my money.
The FDIC claims to pay all interest owed. One or two day turnaround seemed to be the way it operated with the recent Netbank failure.

Also, I am not sure what holding stock in a bank has to do with FDIC insurance.
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