Countrywide’s Angelo Mozilo: He Warned Us—But Washington Didn’t Want To Know
Posted: 22 Jun 2009 11:05 PM PDT
The Securities and Exchange Commission filed an insider-trading civil suit earlier this month against perhaps the most widely loathed wheeler-dealer of the Housing Bubble: Angelo Mozilo, co-founder and longtime CEO of Countrywide Financial Corporation, the largest mortgage lender at the peak of the boom.

The Economist writes: “As is the way these days, the SEC’s case rests largely on internal emails.” [Accusing Angelo June 5, 2009]The SEC released excerpts from Mozilo’s emails to even more aggressive Countrywide executives in which the boss privately questioned his own firm’s new lax credit products. For example, on April 17, 2006, he sensibly lambasted Countrywide’s subprime 80/20 loans (in which borrowers would fund their nominal 20 percent downpayment by taking out a simultaneous second mortgage):

“In all my years in the business I have never seen a more toxic prduct [sic]. It’s not only subordinated to the first, but the first is subprime. In addition, the FICOs are below 600, below 500 and some below 400[.]“\
Unfortunately, Mozilo’s intermittent spasms of skepticism didn’t have much effect—because he was also:

• Imploring government regulators to allow more zero down payment mortgages and liar loans in the name of fighting racist redlining;[/*:m:2s9vck62]
• Publicly reassuring investors about the creditworthiness of Countrywide’s increasingly bottom-of-the-barrel borrowers;[/*:m:2s9vck62]
• And…accelerating his own stock sales.[/*:m:2s9vck62][/list:u:2s9vck62]

In February 2007, Countrywide’s shares peaked at over $45. The following summer the subprime resale market collapsed, setting off the current global economic collapse. Mozilo was lucky to talk hapless Bank of America into buying Countrywide in 2008 for less than one-tenth of its peak price.

Still, you can’t say that Mozilo didn’t warn you in countless speeches over the years that Countrywide’s corporate strategy depended upon pouring colossal sums down the rathole of lending to “underserved Americans” (i.e., minority, lower income [and even illegal alien] borrowers).

For instance, in the top story in National Mortgage News on February 17, 2003:

“Mr. Mozilo labeled downpayments as ‘nonsense’ and said credit score requirements are ’still much too high.’… the outspoken industry leader called on his colleagues to ‘take a chance on making mistakes rather than foreclose on the opportunity’ to put minorities and other underserved families into homes of their own.” [No pun apparently intended]