Matrix Blog

Posts Tagged ‘Countrywide’

[SEC] Suntan-Enabled-Countrywide

June 5, 2009 | 12:27 am | |

Ok, so I admit, I do wonder about the “tan” and how Mozilo (not to be confused with Mozilla) was able to maintain it 365/24/7. But more important issues are front and center in his life right now.

Here’s the SEC press release on today’s announcement. (Can you imagine former SEC Chairman Christopher Cox taking such an action?)

Here’s the actual law suit.

Basically the SEC is going after Mozilo for assuring investors that they were a prime loan lender when they were actually pushing very high risk loans. In fact they were the #1 subprime lender.

Former Countrywide Financial Corp. Chief Executive Officer Angelo Mozilo and two other people were accused of fraud by the U.S. Securities and Exchange Commission following an investigation of the firm’s role in the subprime mortgage crisis.

“This is the tale of two companies,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “Countrywide portrayed itself as underwriting mainly prime quality mortgages using high underwriting standards. But concealed from shareholders was the true Countrywide, an increasingly reckless lender assuming greater and greater risk. Angelo Mozilo privately described one Countrywide product as ‘toxic,’ and said another’s performance was so uncertain that Countrywide was ‘flying blind.'”

This has been brewing for a while.

He has a number of other cases as well, although Countrywide (BofA) is covering his legal expenses.

Mozilo, a defendant in at least 115 other civil cases, already has in place a defense team from Irell & Manella (which is being paid by Countrywide and its insurers). Irell partner David Siegel issued a prepared statement on the SEC charges.

I am getting the feeling that there will be a number of other former executives with big paydays for dubious reasons that are going to get their own press releases. The SEC is trying to get it’s groove back.

Carl W. Tobias, a law professor at University of Richmond, said he expected to see more such cases brought by the S.E.C. “The S.E.C. would like to have back the reputation that many feel it has lost as an aggressive enforcer,” Mr. Tobias said. “I wouldn’t be surprised to see other cases.”

I’m not advocating rampant litigation but the US can’t restore investor confidence if it doesn’t regulate and enforce laws on the books.

This is simply part of the de-leveraging process.

Tags: ,

[Favoritism Update] Special Interest Groups Rates, Countrywide

June 16, 2008 | 1:02 pm | |

I wasn’t surprised to learn that US Senators get mortgages – that makes them – normal.
I wasn’t surprised to learn that US Senators get special deals – that makes them – normal.
I was surprised that key individuals who have influence over the mortgage clean-up didn’t recuse themselves from mortgage related perks or disclose them in advance.

I would hope that these incidents reflect nothing more than bad judgement by the officials involved. Here’s a great recap by

According to the WSJ, US Senator Dodd (CT) got special rates on two mortgages:

Sen. Christopher Dodd, a top figure in Democrats’ response to the housing crisis, defended through a spokesman two mortgages he reportedly received under a special Countrywide Financial Corp. program that awarded preferential interest rates to people referred to as “friends” of the company’s chairman and chief executive, Angelo Mozilo.

And US Senator Conrad also got a favorable rate from Countrywide:

“It appears Countrywide waived one point on my mortgage,” Conrad, a North Dakota Democrat, said in a statement today in Washington. “Although I did not ask for or know that I was receiving a discount, and even though I was offered a competitive loan from another lender, I do not want to have received preferential treatment.”

Conrad said he also received a loan from Countrywide on an eight-unit apartment building in Bismarck, North Dakota, even though the lender typically serves properties that have four units or less. He said he had decided to refinance that loan with another institution.

James Johnson, former head of Fannie Mae, just resigned from the Obama campaign for getting favorable financing from Countrywide.

Property records show Mr. Johnson has received more than $7 million in loans from Countrywide since 1998, the first coming in the waning days of his Fannie Mae tenure. He borrowed $392,950 on a row house in Washington’s Dupont Circle neighborhood, with the rate set for the first five years at 6.375%.

At the time, initial rates for such loans ranged from about 6.2% to 6.5%, according to data compiled for The Wall Street Journal by HSH Associates Inc., which surveys lenders.

And that created an awkward situation for Senator Obama:

Obama has made reforming how the housing market is regulated a centerpiece of his economic platform; as Fannie Mae’s CEO, Johnson worked closely with Mozilo facilitating what became an out-of-control mortgage boom. The massive accounting irregularities discovered at Fannie Mae after Johnson was no longer CEO (but still a consultant) don’t help either.

In other words, everyone seems to be completely and absolutely unaware of favoritism, but feel it is possible that favoritism exists.

Here is a visual recap of current and former government officials associated with Countrywide’s efforts.

  • Christopher Dodd – US Senator
  • Kent Conrad – US Senator
  • Richard Holbrooke – former UN Ambassador
  • Donna Shalala – former Secretary of HHS
  • Alphonso Jackson – HUD Secretary
  • James Johnson – former CEO of Fannie Mae

We are going through a mortgage/credit problem that began, was fueled and based on favoritism. The mortgage process during the housing boom was characterized by the lack of neutrality which is why investors ended up owning portfolios of inflated assets.

I am certainly exaggerating the impact here but the credit problems are unprecedented. Should it be a surprise to us that, even with the most neutral or unbiased intentions, a public official would be concerned how this would appear to the public if known? Isn’t the one of the goals of fixing the credit problem, to allay investor concerns over the lack of neutrality?

Or are we jealous that we didn’t get better mortgage rates. I know I am.

Tags: ,

Get Weekly Insights and Research

Housing Notes by Jonathan Miller

Receive Jonathan Miller's 'Housing Notes' and get regular market insights, the market report series for Douglas Elliman Real Estate as well as interviews, columns, blog posts and other content.

Follow Jonathan on Twitter

#Housing analyst, #realestate, #appraiser, podcaster/blogger, non-economist, Miller Samuel CEO, family man, maker of snow and lobster fisherman (order varies)
NYC CT Hamptons DC Miami LA Aspen
Joined October 2007