Mr. Lucky

Published: June 29, 2016

By Jim Lichtman
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Countrywide was one of the greatest companies in the history of this country and probably made more difference to society, to the integrity of our society, than any company in the history of America.  – Angelo Mozilo, co-founder and CEO, Countrywide Mortgage


Last Friday (June 24), The New York Times reported that “the Justice Department told Mr. Mozilo, the former chief executive of Countrywide Financial, once the nation’s largest subprime mortgage lender, that he was no longer under investigation in connection with civil mortgage fraud. The government’s criminal inquiry into Mr. Mozilo’s role in the financial crisis was dropped previously, so he is now in the clear.”

“Some Justice officials” The Wall Street Journal writes (June 17), “were interested in moving forward with the case and believed they had documents and other evidence to prove fraud, but others believed the evidence wasn’t strong enough to proceed…

“The Securities and Exchange Commission had previously ordered Mr. Mozilo to pay $67.5 million in 2010 to settle a similar civil fraud case. He neither admitted nor denied those claims and didn’t personally pay the whole penalty.”

Times Business reporter Gretchen Morgenson asked Mozilo’s attorney, David Siegel, if his client believed that Countrywide had done nothing wrong.

“Mr. Mozilo always has been deeply troubled,” Siegel told the reporter, “for the many borrowers who played by the rules and who still suffered during the financial crisis, and any implication otherwise would be unfair.”

“In the last week,” Moregenson writes, “I reread and listened to many of the interviews government investigators had with Mr. Mozilo after the financial crisis. In those conversations, Mr. Mozilo maintained that his company had strong ethical standards.

“In an email to a colleague written in April 2006, for example, Mr. Mozilo spoke critically about a situation in which Countrywide had to buy back problem mortgages it had sold to HSBC.

“ ‘The loans were originated through our channels with serious disregard for process, compliance with guidelines and irresponsible behavior relative to meeting timelines,’ he wrote.

“Internal documents provided by a former Countrywide employee,” Morgenson continues, “showed that as early as September 2004, lending audits in six of the company’s largest regions identified one in eight loans as ‘severely unsatisfactory’ because of poor underwriting. And that was well before the housing boom.

“Mr. Mozilo certainly succeeded in creating a profit powerhouse at Countrywide, at least for a while. One reason the company’s stock became a highflier is that Countrywide was a vertically integrated mortgage machine, with an array of subsidiaries poised to wring fees from every stage of the lending and loan servicing process. Providing in-house appraisals, property maintenance, insurance and other services meant Countrywide could mark up the costs of its services, sometimes by more than 100 percent, the government found.

“Such charges were at the heart of a June 2010 case brought by the Federal Trade Commission against the company. The agency’s determination? Countrywide overcharged almost half a million of its customers. …

“It is astonishing that one single company could be responsible for overcharging more than 450,000 homeowners, which is more than 1 percent of all the mortgages in the United States,” Jon Leibowitz, then chairman of the trade commission, told me in a 2011 interview after Countrywide settled the case. Its business model was “based on deceit and corruption, and the harm they caused to American consumers is absolutely massive and extraordinary.”

“In early 2008, Donald F. Walton, then the United States trustee for the Atlanta region, filed suit against Countrywide over a 2005 bankruptcy filing involving John Wayne Atchley and Robin April Atchley, homeowners in Waleska, Ga.

“Countrywide, the servicer of the Atchleys’ loan, levied improper fees and claimed twice that the borrowers were behind on their mortgage when they were not. Lawyers for Countrywide moved to seize the Atchleys’ property, withdrawing only after the couple proved them wrong in court.

“ ‘Countrywide’s failure to ensure the accuracy of its pleadings and accounts in this case is not an isolated incident,’ Mr. Walton wrote in a brief. ‘In recent years, Countrywide and its representatives have been sanctioned for filing inaccurate pleadings and other similar abuses within the bankruptcy system.’

“In western Pennsylvania, a court found that the company had fabricated documents related to a borrower’s bankruptcy. The documents, supplied to the court, erroneously claimed that a borrower owed $4,700 for escrow-related costs.”

While Mozilo is off the hook for fraud, what of the homeowners left in the wake of the Countrywide disaster?

“One was Daniel A. Bailey Jr.,” Morgenson continues, “now a veterinary technician living in Wilmington, N.C. Mr. Bailey, 49, shot to prominence in 2008 when he received an inadvertent email from Mr. Mozilo blasting him for asking for Mr. Mozilo’s help in modifying his loan.

“ ‘This is unbelievable,’ Mr. Mozilo wrote in the message, which quickly ricocheted across the web. ‘Most of these letters now have the same wording. Obviously they are being counseled by some other person or by the internet. Disgusting.’

“In an interview Wednesday, Mr. Bailey said he considered himself very lucky because Bank of America worked out a deal with him to stay in his 900-square-foot bungalow. Nevertheless, it took the better part of seven years, he said.

“ ‘I lucked out,’ Mr. Bailey said. ‘If I had been any other person, I would be out of my house and living on the street. I’m part of the 0.0001 percent because everybody else this happened to didn’t get that email from Mozilo.’

“I also contacted Jane Connor, of Arlington, Mass.,” Morgenson writes, “who teaches at the Massachusetts Institute of Technology. I wrote about her mortgage woes in September 2007 after she had tried unsuccessfully to get Countrywide to let her sell her house for less than the amount outstanding on the mortgage, known as a short sale. Ms. Connor fell behind on her loan after her husband lost his job and she became ill.

“ ‘I spent months on the phone every day trying to get someone to help me sell,’ Ms. Connor said in an interview Tuesday. ‘They ignored us, and every month that went by our indebtedness grew.’ ”

It was only after Morgenson personally asked Countrywide about Connor’s situation that the company began working with her to sell her house. Others, thousands, were not so lucky.

As for Mozilo, he settled a suit with S.E.C. in October 2010, (I wrote about Mozilo in 2010).

“Regulators contended that Mr. Mozilo and two of his former lieutenants hid growing risks in Countrywide’s operations from investors and generated improper profits on stock sales while aware of Countrywide’s woes.

“From November 2006 through October 2007, the commission said, Mr. Mozilo generated $140 million in gains on stock he sold.

“Without admitting or denying the accusations, Mr. Mozilo settled the case and accepted a permanent prohibition on serving as an officer or director of a public company. He paid $67.5 million to the government, $45 million of which was covered by Countrywide and Bank of America.

“The roughly $22 million Mr. Mozilo personally paid pales in comparison with the gains he reaped from Countrywide stock over the years.”


  1. The handsome Mr. Mozilo is now 77, and I’m surprised you don’t bump into him occasionally on State Street or in Home Depot. Mozilo lives in a 12,692-square-foot house in Santa Barbara. Watch your back, AND your front, Jim. Nice piece. Right out of Enron, Madoff and several others which I see on the immediate horizon.

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