Mozilo – Countrywide FinancialMozilo “is a great salesman, and great salesmen are often the ones who get sold,” a former Countrywide executive says.Countrywide Financial, was founded in 1968 by Angelo Mozilo and David Loeb. By 1992 Countrywide was the biggest originator of single-family mortgages in the nation, issuing near $40 billion in mortgages that year alone. Mozilo the butcher’s son from the Bronx, and the company he built as he called Countrywide “baby,” became the America’s largest home mortgage lender. He created a company that was model for others where he made mortgages by borrowing money from banks and not by utilizing deposits. Countrywide became so big by making home mortgages to Americans which past most of Banks including those banks that they acquired money from. Mozilo was so ambitions and desperate to be number one in all the markets. Mozilo’s creation riches to a 15 percent market share, what means 15 out of 100 loans closed in the US belonged to Countrywide. (Chain of Blame p. 4) However, Angelo was not satisfied with 15 percent market shares he was so hungry for more, he wanted to reach 20 percent, which led Countrywide into a race to the bottom as the mortgage market flew out of control. Because of Angelo’s ambitions and because of his eager to grow his baby bigger and bigger a lot of things started to go down for Countrywide. Angelo was aware of a subprime mortgage crisis coming — for all others except his own company. Though, Angelo had been warning for a surprisingly long time from others that his industry was going into dangerous place as well. Regardless the warning Mozilo was unwilling to give up the control of his baby, which led to an upheaval in Countrywide’s executive ranks at the worst possible time. In other words, the real story of what went wrong at Countrywide from the biggest mortgage lender in the US is an exemplary business story of self-fancy, selling out, and desire gone skewed. “Mozilo was very confident that he was making widgets. He got too far away from understanding the real risk in the balance sheet. Even at the end, he believed that things were okay. The end of Angelo’s baby has arrived where and subprime loans turned up to be the worst business decision Angelo had ever made in his life. Countrywide in January 2008 was bought by Bank of America for $4 billion; less than a year earlier its market capitalization was around $25 billion, all this because of Angelo’s business practices that he was eager to be number one.Mozilo has been publicly criticized as one of the real villains of the subprime scandal — and the case against him was one of the few the government has brought in the wake of the financial crisis. So Countrywide was built by Angelo and his partner from scratch and grow up to a huge mortgage lender in the US and a few years after reaches the heap, Countrywide was gone. b. Essentially, Countrywide’s operation was set up to squeeze the most amount of money from people who couldn’t afford to get a “conforming” mortgage, either because they were low-income borrowers or because they had poor credit. Pretty much as rising rates had pulverized savings and loans (S&L) 10 years prior, falling interest rates did turbocharge Countrywides development. Lower interest rates helped people more with some assistance affording homes. Countrywide began encouraging people who already owned their home to take advantage of lower rates and refinance their property. Subprime mortgages were much more profitable for Countrywide because of the early repayment penalties, fees, and the fact that they were a much more attractive investment for Countrywide to sell on the secondary market. All these outside factors pushed countrywide toward subprime loans where doors for more easy earnings were open for them because of the lack of Government regulations. Mortgage default rates have been far lower in other countries than in the United States, despite the fact that several countries had greater house price volatility. The lack of subprime lending (outside of the United Kingdom) and less use of limited or no documentation lending were major factors. (International Comparison of Mortgage Product Offerings, By Dr. Michael Lea, page 8)
b. Of late, the Government has been increasing the money-market control of some small fraction of mortgage originators. This is because the Government, with the support of other groups (even the Bank of Canada) in Canada, Canada, the US and Canada, has been the most generous beneficiary of these loans. The Government has been doing what is called to do with the sale of subprime loans to finance Countrywide as well in a way that did not hurt Countrywide, but does benefit