Crook Alert--Countrywide--Enron's Second Coming? by Paul Krugman

Angelo Mozilo

Countrywide Victimized Three Distinct Groups

In his column this morning (10-1-07) Paul Krugman says that

"It appears that Mr. Mozilo (Countrywide's CEO who paid himself $142 million last year) achieved the rare feat of victimizing three distinct groups.

"First were the borrowers. As the Times's Gretchen Morgenson reported in August, Countrywide often led customers to 'high-cost and sometimes unfavorable loans' that, among other things, generated 'outsize fees to company affiliates providing services on the loans.'

"Then there are the investors who bought those Countrywide mortgages directly or indirectly, in the form of financial instruments created by slicing and dicing claims on borrowers.

"You can't especially single out Countrywide for the failure of investors to realize how much risk they were taking on--that's a failure with many fathers, including everyone from Moody's and Standard and Poor's, which were far too free with their AAA ratings, to Alan Greenspan, wh assured us that while there might be a bit of 'froth,' there was no national housing bubble.

"Last but not least, since it may be the key to the whole story, is the victimization of Countrywide's own stockholders.

"Last year Mr. MOZILO'S HUGE COMPENSATION DREW A PROTEST FROM A GROUP OF SHAREHOLDERS INCLUDING THE AMERICAN FEDERATION OF STATE, COUNTY AND MUNICIPAL EMPLOYEES PENSION PLAN. BUT THE WORST WAS YET TO COME.

In late 2006, even as Countrywide began using shareholders' money to buy back its own stock at more than $40 a share--it's now worth only $19--Mr. Mozilo wasw selling. Between November 2006 and August 2007--that is, during the months before investors fully realized the extent to which his company would be hurt by the subprime mortgage crisis--he unloaded $138 million worth of of Countrywide's stock."

http://www.nytimes.com/2007/10/01/opinion/01krugman.html?ref=opinion

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Comments 8 comments

Mervis Urquhart 8 years ago

WHY NOT HELP THE OWNERS OF HOMES IN WHATEVER WAY YOU CAN TO COME OUTOF THE MESS. A LOT OF PEOPLE NEEDS HELP AND I THINK YOU SHOULD THINK ABOUT SOME WAYS TO HELP THE PEOPLE.


Ralph Deeds profile image

Ralph Deeds 8 years ago Author

I agree. Thanks for your comment.


HouseBuyer profile image

HouseBuyer 8 years ago

It will be terribly difficult. When the soon to be leaders of the country are about to hand over the entire citizenry to health insurance companies, force everyone to buy insurance and call it a national health care plan...HA....

When they (the federal reserve whose board includes Rockefeller's and other bankers and rich elite) create a huge housing bubble and these companies give loans to everyone, trading bunk pieces of paper, dollars, entries in accounting books, for REAL property, our homes and properties and then foreclose, taking that real property for that bunk dollar or check and simply crossing out that line in their accounting books .....what just happened? They got real property for nothing. That money they loaned you did not come from someones savings. It is an accounting entry. And they got your house for it! Who do you think owns these banks and lenders? The same people on the board of the Federal Reserve maybe? The Federal Reserve is a private corporation. IT IS NOT A GOVERNMENT ENTITY!

We are being sold out. No one is going to help us, they are too busy helping themselves to our money and properties.

As a private real estate investor of the we buy houses and foreclosure ilk, I find it very unfortunate and never want to see anyone lose their home. It used to be conflicting, but no one else is helping these people or buying their homes.


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Ralph Deeds 7 years ago Author

Wells Fargo was just as bad as Countrywide

I have a dream house

By Elizabeth Jacobson

From an affidavit by Elizabeth Jacobson, a former loan officer at a Maryland branch of Wells Fargo, submitted in support of a federal lawsuit brought by the city of Baltimore against the bank. The city filed the lawsuit in January 2008, claiming that Wells Fargo targeted African Americans in Maryland for high-interest subprime mortgages, which have since forced many homeowners into foreclosure. The affidavit was submitted in June. Asked for comment, Wells Fargo said that it believes the “lawsuit lacks merit” and stated that “race is not a factor in the pricing and products we offer.”

I worked directly with loan applicants to make subprime loans. Much of my business came from referrals from Wells Fargo loan officers who were on the prime-loan side of the business. These loan officers were known as “A reps.” For several years I was the top subprime-loan officer at the company. My pay was based on commissions and fees from making these loans. In 2004, I grossed more than $700,000 in sales commissions.

The commission and referral system at Wells Fargo was set up in a way that made it more profitable for a loan officer to refer a prime customer for a subprime loan than make the prime loan directly to the customer. I knew that many of the referrals I received could qualify for a prime loan. It was in my financial interest to figure out how to qualify referrals for subprime loans. Moreover, in order to keep my job, I had to make a set number of subprime loans per month.

There were various techniques that were used to qualify the A-rep referrals for subprime loans. One way was to tell customers not to put any money down on the loan and borrow the entire amount, even if they could afford a big enough down payment to qualify for a prime loan. Another technique would be to tell the customer that the only way to get the loan closed quickly would be to submit it as a subprime loan. Some A reps actually falsified loan applications in order to steer prime borrowers to subprime-loan officers. One means of falsifying loan applications that I learned of involved cutting and pasting credit reports from one applicant to another. I was also aware of subprime-loan officers who would cut and paste W-2 forms. I reported this conduct to management and was not aware of any action taken to correct the problem.

Federal Housing Administration (FHA) loans, like other government-insured loans, offered lower interest rates that are closer to prime rates. Subprime-loan officers were required to have a subprime borrower sign a “Benefit to Borrower” statement that stated that the borrower may qualify for a government-insured loan but did not want it because it was too much paperwork. In fact, subprime-loan officers were never trained in how to make FHA or government-insured loans. We asked for this training, but Wells Fargo refused to provide it.

I know that Wells Fargo Home Mortgage tried to market subprime loans to African Americans in Baltimore. I am aware from my own personal experience that one strategy used to target African-American customers was to focus on African-American churches. Wells Fargo had a program that provided a donation of $350 to the nonprofit of the borrower’s choice for every loan the borrower took out with Wells Fargo. Wells Fargo hoped to sell the African-American pastor or church leader on the program because Wells Fargo believed that church leaders had a lot of influence over their ministry and in this way would convince the congregation to take out subprime loans with Wells Fargo.

I remember being part of a conference call that took place in 2005 where Wells Fargo sales managers discussed the idea of going into black churches in Baltimore to do presentations about our subprime products. On that call we were told that we “have to be of color” to come to the presentation. The idea was that since the churchgoers were black Wells Fargo wanted the loan officers to be black. I was told that I could attend only if I “carried someone’s bag.” Subprime-loan officers did not target white churches for subprime loans. When it came to marketing, any reference to “church” or “churches” was understood as code for African-American or black churches.

I complained many times about what I thought were unethical or possibly predatory loan practices that Wells Fargo was engaged in. Managers never took any action to respond to my concerns. In my office we morbidly joked that we were “riding the stagecoach to Hell.”

22


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Ralph Deeds 6 years ago Author

Countrywide Home Loans and its mortgage servicing unit, which are now part of Bank of America, agreed on Monday to pay $108 million to settle federal charges that the company overcharged customers who were struggling to hang onto their homes.

http://www.nytimes.com/2010/06/08/business/08ftc.h...


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Ralph Deeds 5 years ago Author

Angelo R. Mozilo, the founder and former chief executive of Countrywide Financial, once the nation’s largest mortgage lender, agreed to pay $67.5 million Friday to settle a civil fraud case brought by the Securities and Exchange Commission last year.


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Joe Badtoe 5 years ago from UK

Ralph

it is a pleasure to read your informed hubs and once I can get those 5 neocons who keep getting me banned on the forum to read your stuff they just might get healed!

Great work.


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Ralph Deeds 5 years ago Author

Thanks, Joe. Don't take it personally. I've been banned a couple of times. See you back soon.

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