DRAFT -- 11/26/96 212-859-8171
December __, 1996 (Fax: 212-859-8588)
Countrywide Credit Industries, Inc.
Countrywide Home Loans, Inc.
Countrywide Capital I
155 North Lake Avenue
Pasadena, California 91101
Ladies and Gentlemen:
We are acting as special counsel to Countrywide Home Loans, Inc., a
New York corporation (the "Company") and a wholly owned subsidiary of
Countrywide Credit Industries, Inc., a Delaware corporation ("CCI"), CCI and
Countrywide Capital I, a statutory business trust formed under the laws of the
State of Delaware (the "Trust"), in connection with the proposed issuance by the
Company of ___% Junior Subordinated Deferrable Interest Debentures due December
1, 2026 (the "Subordinated Debt Securities"), and the proposed purchase of the
Subordinated Debt Securities by the Trust with the proceeds of its issuance of
___% Capital Trust Pass-through Securities/SM/ (the "Capital Securities"),
all as contemplated by the joint Registration Statement on Form S-3 (File Nos.
333-14111, 333-14111-01, 333-14111-02 and 333-14111-03) (as amended by Amendment
No. 3 thereto) of the Company, CCI, the Trust and Countrywide Capital II,
another statutory business trust formed under the laws of the State of Delaware
(the "Registration Statement"). Terms with initial capitals used in this letter
and not otherwise defined herein have the meanings set forth in the Registration
Statement.
You have requested our opinion concerning (a) the characterization of
the Trust and the Subordinated Debt Securities for United States federal income
tax purposes, and (b) the section of the Registration Statement captioned
"United States Federal Income Taxation." In expressing our opinion, we have
examined and relied upon the Registration Statement, the Declaration and the
Indenture (each, in the form filed as an Exhibit to the Registration Statement),
certain representations of officers of CCI and the Company (the
"Representations"), and such other materials as we have deemed necessary or
appropriate.
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/SM/ Salomon Brothers Inc has filed applications with the United States Patent
and Trademark Office for the registration of the Capital Trust Pass-through
Securities service mark.
Countrywide Credit Industries, Inc.
Countrywide Home Loans, Inc.
Countrywide Capital I -2- December ___, 1996
We have assumed, with your permission, that the facts stated in the Registration
Statement and the Representations are true and complete, that the Indenture and
the Declaration will be executed in the forms filed as Exhibits to the
Registration Statement, that the Trust will be administered in accordance with
the terms of the Declaration, that the Subordinated Debt Securities will be
issued and administered in accordance with the terms of the Indenture and that
the Capital Securities will be issued and administered in accordance with the
terms of the Declaration.
Our opinion is based upon the provisions of the United States Internal
Revenue Code of 1986, as amended, existing and proposed Treasury regulations
promulgated thereunder, judicial decisions and rulings and other pronouncements
of the Internal Revenue Service (the "Service"), all as in effect on the date
hereof. The application of some of these provisions, regulations, decisions,
rulings and other pronouncements is uncertain in the absence of definitive
guidance and may be subject to differing interpretations. Our opinion does not
bind the Service and there can be no assurance that the Service or a court of
law would agree with the conclusions expressed in our opinion. Further, all
such provisions, regulations, decisions, rulings and other pronouncements are
subject to change, possibly with retroactive effect. Accordingly, there can be
no assurance that future changes in law will not affect the conclusion set forth
herein.
In particular, on March 19, 1996, President Clinton announced a
proposal which would treat as equity for federal income tax purposes securities
like the Subordinated Debt Securities that are issued on or after December 7,
1995. On March 29, 1996, Senate Finance Committee Chairman William V. Roth, Jr.
and House Ways and Means Committee Chairman Bill Archer issued a joint statement
indicating their intent that this proposal would have an effective date no
earlier than the date of "appropriate Congressional action." If such a proposal
is enacted, there is no assurance that the effective date guidance contained in
the joint statement will be incorporated into the proposal.
Characterization of the Trust. Based upon and subject to the
foregoing, it is our opinion that, for federal income tax purposes, the Trust
will be characterized as a grantor trust, and will not be characterized as an
association taxable as a corporation. Accordingly, for income tax purposes,
each holder of Capital Securities generally will be considered the owner of an
undivided interest in the Subordinated Debt Securities owned by the Trust, and
each US Holder will be required to include all income or gain recognized for
income tax purposes with respect to its allocable share of the Subordinated Debt
Securities on its own income tax return.
Countrywide Credit Industries, Inc.
Countrywide Home Loans, Inc.
Countrywide Capital I -3- December ___, 1996
Characterization of the Subordinated Debt Securities. Based upon and
subject to the foregoing, and although there is no controlling authority
directly on point, it is our opinion that the Subordinated Debt Securities
should be characterized as indebtedness of the Company for federal income tax
purposes.
"United States Federal Income Taxation" Section. Based upon and
subject to the foregoing, and based upon the assumptions and subject to the
qualifications and limitations set forth in such section, we hereby affirm that
(a) it is our opinion, as of the date hereof, that the statements in the section
of the Registration Statement captioned "United States Federal Income Taxation"
summarize the material federal income tax consequences of the purchase,
ownership and disposition of the Capital Securities, and (b) to the extent such
statements constitute statements of law or legal conclusions with respect
thereto, such statements represent our opinion, as of the date hereof, with
respect to the matters set forth therein.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the captions
"United States Federal Income Taxation" and "Legal Matters" therein. In giving
this consent, we do not hereby admit that we are in the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended.
No opinion is expressed on any matter other than that specifically
referred to herein.
Very truly yours,
FRIED, FRANK, HARRIS, SHRIVER & JACOBSON
By: ____________________________________
Lee S. Parker