Angelo Mozilo, who has been vilified for his role in the sub-prime credit crisis, agreed on a deal to sell Countrywide to Bank of America for $4 billion in stock. The buyout amounts to a rescue for the business, which has been flirting with bankruptcy despite a portfolio of 9 million loans worth a total of $1.5tn.
As America’s largest mortgage provider, Countrywide has shouldered sizeable blame for the industry’s aggressive promotion of loans to low-income households. The company is under investigation in Illinois for misleading customers about their repayment commitments.
Mozilo, a butcher’s son from New York who co-founded Countrywide in 1969, was paid $142m in 2006 and has sold more than $400m in shares in recent years. Bank of America said he was unlikely to stay after the takeover, but he will get a severance package estimated by compensation experts at $36m and his stake is valued in the buyout at $3.5m.
“I would want him to stay until the deal gets done and then probably I would guess that he would want to go have some fun,” said Bank of America’s chief executive, Ken Lewis.
Mozilo epitomizes the fraudsters who used unlicensed, unregulated mortgage operations around the U.S. to create the sub-prime hustle. Still, it looks like “respectable” bankers ain’t going to make it tough on one of their bubbas.
Well, I hope they give Countrywide to somebody with principles.
I have a mortgage with them (decent rate, btw) that was deliberately low-balled by not properly figuring the Escrow, and then, later, by switching to a Government-approved “take all you can get away with” formula that added about $200 to my monthly payment within six months.
(They didn’t bother to figure in the homeowner’s insurance, and used a wrong tax value. Then, after that got sorted out, decided that they needed to protect themselves by adding a substantial percentage to the Escrow payment to allow for changes in tax rates.)
They also insisted I take an Equity loan (Adjustable, of course) to cover some old Credit Card debt. The payment doubled within a year.
It’s still tolerable, but not the deal it was supposed to be.
Regards,
Stu.
In addition to this guy and other mortgage providers, there is plenty of blame to go around.
What made it all possible was packaging these mortgages – along with good ones – into unregulated securites. These securities were traded like any other commercial paper – each sale producing easy profits for the seller.
Nobody could evaluate the true quality of the underying mortgages – but they didn’t care, since they intended to sell out fast anyway.
As in “musical chairs”, when the music stops, someone loses. The music stopped when interest rate adjustments hit, and people started defaulting.
By selling the original mortgage, the originator passed the risk to others and got paid immediately. If the company that provided the original mortgage assumed the risk, the entire process would not have happened because credit would not be given to bad risks.
What I take from all this:
– The financial industry is motivated by greed – not a legitimate quest for reasonable profit over the long term.
– Many of these (so called) sub-prime loans were for second homes. Even those who are well off aren’t as smart as they think they are.
– The lack of reasonable regulations is another example of the US government being owned by private industry. (and not just the financial industry)
Predictions:
1 – The governemt will rescue everyone except the mortgagees, who will lose their property, their credit ratings, and their life savings.
2 – Thanks to the unconscionable changes to bankruptcy laws pushed by the financial industry, relief for the – already defrauded – will be unavailable.
3 – We won’t see the end of this disaster for years.
4 – Since we’ve learned nothing from history (the financial collapses of the 1920s and 1930s), nothing good will come out of all this.
I’m the Stu in #2. I’m not the same Stu in #1.
Hey Stu – great name, eh?
I’m calling for the death penalty on this guy, I will volunteer switch pulling duty.
They should keep him around until his contract runs out, from which he has already collected. But have him work in the rest room handing out towels and yes siring, brushing the coats of all the all the rising execs as they take a crap. He would leave on his own and save the company a few bucks.
Greed run amok!
And Greenspan said that he didn’t take it seriously enough. Is he kidding?
More than enough blame to go around.
And, yes, the taxpayers will pay for it.
Just another fat cat republican, this time a Romney supporter. As long as there scumbag republicans control the judiciary guys like this will get away with raping the American public.
http://www.newsmeat.com/fec/bystate_detail.php?zip=91302&last=MOZILO&first=ANGELO
I enjoy reading about companies that are down in the dumps and then going to their website and not seeing a single mention of their problems.
What makes him a fraudster? Give him the death penalty??? The lengths to which people want to keep the poor from trying to join the middle class.
Someone needs to say something about this! http://www.fakepaycheckstubs.com IS THIS LEGAL? No wonder why we have the subprime mess why have when lenders USE FAKE DOCUMENTATION to help PUSH the loan through and hence MAKE thier commissions illegally! This is SO dispicible and blatent!!! NOW BANKS ARE BAILING OUT THE CROOKS??? SOUNDS LIKE S&L SCANDAL ALL OVER AGAIN!!! see it for yourself at http://www.fakepaycheckstubs.com this is unbelievable!
Banks bailing out the crooks? They are buying out the debts, so now they’re on the hook for the loss.
There nothing crooked about giving out a loan. Someone gets a house out of it, if they can’t make the payments they agreed to, then they’re out that house and back to where they started.
You guys are hysterical.
What’s criminal is if the government bails out the lenders, and puts the taxpayers on the hook
k6RJH0 Cool, bro!