Mozilo on distressed borrower's appeal for help: "disgusting"

In an e-mail inadvertently sent to a distressed homeowner trying to avoid foreclosure, embattled Countrywide Financial Chairman Angelo Mozilo lashed out at an online counseling service for distressed borrowers, calling the website's efforts "unbelievable" and "disgusting."

"This is unbelievable," Mozilo wrote in the e-mail, which was posted on a forum on the website LoanSafe.org. "Most of these letters now have the same wording. Obviously they are being counseled by some other person or by the internet. Disgusting."

Read full coverage of the e-mail flap from the Los  Angeles Times here.

Mozilo was responding to an e-mail from Daniel Bailey, who wrote a "hardship letter" to Mozilo and 16 other Countrywide employees. Bailey acknowledged he wrote the letter using a format provided by the website LoanSafe.org.

In his original e-mail, Bailey requested a loan modification, saying he was unable to make rising payments on his adjustable rate mortgage. "The main reason that caused me to have a hardship and to be late is my misunderstanding of the original loan," Daniel wrote in his e-mail to Countrywide. "I was told that after the first year of payments, I would be able to refinance to a better fixed rate -- then the bottom fell out of the industry. My payments for that first year were on time. I also lost my second income due to physical conditions in a very physically demanding industry."

At least two other housing blogs wrote about the exchange Tuesday. On Tuesday evening, Countrywide issued the following statement: "Countrywide and Mr. Mozilo regret any misunderstanding caused by his inadvertent response to an e-mail by Mr. Bailey. Countrywide is actively working to help borrowers, like Mr. Bailey, keep their homes."

After receiving the "disgusting" e-mail comment from Mozilo, Bailey wrote a second e-mail to Countrywide, acknowledging he had consulted an online forum for advice in drafting a hardship letter to Countrywide: "In attempting to come to some way to save my home, I took the advice on forming my hardship letter from a forum. Why? Not all of us have been to a university to study business and we need some help in dealing with these matters. (perhaps, if we had, we would not have fallen for what we did, to start with).

"To have recieved the e-mail that I did, stating by one of your employees, that what I did was 'disgusting' and 'unbelievable' has been just about the final straw. I am trying to do the right thing, I am trying with every ounce of what I have left in me not to blow my brains out over losing the home I have been in for 16 years. The only hope I had left was that perhaps the countrywide company did want to help the people it is servicing ... then I receive that responce to my letter. Just great. Now I know, that it is all a nice fat laughing matter to those who are supposed to help."

Mozilo has been heavily criticized for reaping huge gains by selling Countrywide stock while the company's value was collapsing and the mortgage industry was in crisis. The Times reported he was paid $48 million in compensation in 2006, and cashed in stock options worth $140 million in 2006 and 2007.

LoanSafe founder Moe Bedard said he founded the website to help homeowners find information about working with their lenders to avoid foreclosure. "I knew there was nothing on the Internet to help people work out their mortgage loans," he told L.A. Land. Among other resources, the website gives borrowers e-mail addresses and phone numbers for bank executives who handle loan modifications. It also provides sample "hardship letters" to help borrowers make a written appeal for a loan modification. Bedard says his advice has helped 80 homeowners avoid foreclosure.

Bedard's sample loan letter begins: "I am writing this letter to explain my unfortunate set of circumstances that have caused us to become delinquent on our mortgage. We have done everything in our power to make ends meet but unfortunately we have fallen short and would like you to consider working with us to modify our loan. Our number one goal is to keep our home and we would really appreciate the opportunity to do that."

Bedard said he encourages distressed borrowers to use the format of the letter and then to "make it your own, and don't be too lengthy."

Bailey's e-mailed hardship letter to Countrywide, which he posted online, begins: "I am writing this letter to explain my unfortunate set of circumstances that have caused me to become delinquent on my mortgage. I have done everything in my power to make ends meet but unfortunately I have fallen short and would like you to consider working with me to modify my loan. My number one goal is to keep my home that I have lived in for sixteen years, remodeled with my own sweat equity and I would really appreciate the opportunity to do that. My home is not large or in an upscale neighborhood, it is a “shotgun” bungalow style of only 900 sq. ft. built in 1921. I moved into this home in May of 1992 … this was the same year I got clean and sober from drugs and alcohol, and have been ever since, this home means the world to me."

Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Photo Credit: Getty Images

Comments

[Maggie Knowles]

I remember every lender was saying the same thing to every borrower, get this adjustable rate mortgage now, you can refinance to a fixed rate six months to a year later. LENDERS LIKE COUNTRYWIDE LIED TO THEIR CUSTOMERS. If they weren't lying, why didn't Countrywide (and other companies) have a team of loan officers ready to refinance these customers to the fixed loans six months to a year later?

[LA-Architect]

i have a friend who is going to countrywide for a loan modification. actually the person wants a significant reduction in the principal and drastically reduced interest rates.

From my perspective that just sucks. Rewarding bad financial decisions is wrong. So the house ends up in foreclosure. A prospective buyer can then buy this house at the "TRUE" market value and be able to afford the loan. It's a "lose you gambled"and "win you waited for what you can afford" scenario.

I can't believe the bailouts for gamblers.

[TheBeefIsPrime]

This is a NON-story. It's just plain ridiculous in every way, shape, and form.

So yeah, how very predictable that you picked up on it for this illustrious Internets blog. Whats really scary is that it made the front page of the LA Times website. Talk about dinky dink.

[Tombstone Realty]

If Mo-Zilla wasn't Mo-Zilla - I'd totally agree with his sentiment that it seems everyone and their uncle is trying to get out of a contract they legally signed (refi, mortgage, no matter).

However, I can't feel sorry for that lizard, so I laugh that he's getting bashed, and that Bush's so called "rescue plan" has been revealed as the charade it is.

I do have a problem with Moe Bedard's post however.

I had really wanted to buy, FINALLY, my own place, that no one could evict me from because they were turning the apartments into condos. A place for *me*. To live.

But I looked at the market, and I knew that the prices were overinflated. I also knew the market would subsequently collapse. I knew that everything from tax revenues to neighborhoods would disappear overnight if I helped run things up. So I held back.

Unfortunately too many people didn't think "Oh, this is where I'll raise my children". No, it was "Oh I'll flip this in two years and use the profits for my flat screens and Hemi truck".

IF people had thought things through, instead of hoping for easy cash, then we wouldn't be facing this current situation. It's the homeowners' *fault*. Between the overstated equity, and using HELOCs to buy junk, they overinflated the economy. States started overspending their 'windfall" of tax revenues. Then the bottom fell out, and now we're looking at not having enough teachers and firemen. No amount of "bailout" is going to restore the taxes for these people's jobs.

The prices would have stayed in line with salaries if people refused to pay them. It is personal GREED that has damaged the economy, and ruined these people's lives. It's self-inflicted pain and suffering.

I'd love to have my own little Sliver of the American Pie too, you know. But I am not going to sacrifice my future to get it.

[Dean Ross]

I've never considered myself the sharpest tool in the shed. But if there is one thing I know, I would never sign anything I did not totally understand. I would spent money for the best R.E. attorney around to explain in simple terms what I am getting into. You signed a contract and did not understand! Your a complete idiot and deserve what's coming to yea...............

[jbunniii]

Countrywide has nothing left to lose at this point. Why would they agree to "work out" their customers' loans? The deal is very simple: pay your mortgage on time, or give the house back to the lender. The exact same thing is true for renters, and no one thinks it should be otherwise, or that tenants should be bailed out.

[RadioManTodd]

In a way, I think he's right. I work in a field where all day long I take appeals from people saying "I can't pay" (utility industry, not anything to do with housing/mortgages/banking) and you'd be floored at how unoriginal every statement is.

"I've been out of town....."

"I've been out of work for a couple months" (doesn't explain the fact that you've been a deadbeat for the last 3 years)

"I'll have more money on Friday...."

Its the same thing, day after day, customer after customer. If anyone can come up with an original excuse, I'll usually roll with it either because a.) they're really in a legitimate bind, or b.) were at least dedicated enough to put some effort into it.

[rgb]

This guy obviously took as much money out of his house "of 16 year" just a year or two ago. Now he wants the bank to frogive his stupidity! What did he do with 16 years of equity?? Where is all that money now?

[G]

Wow! It’s easy to attack the victim! I know there are victims and predators on both sides of the fence, but my guess it the people who’s main purpose was profit not find a place to live who is the main predators. I had my own personal run in with a predator lender who will tell anything over the phone to get you to sign the loan docs but tries to change things for there benefit at closing! It happened to me, it was a refinance I was going to be a fixed rate jumbo loan but at last minute they pulled some bad info from my credit report and said they could not finance the loan at a fix 5.25 but could do a variable rate of 8.5! This days before closing and after wasting 4 weeks with them and all the fixed rates elsewhere had move more then a 3/4 points!!!!! It took an additional 3 months of letters, phone calls, and finally a complaint over bait and switch to a regulatory agency to finally get my fixed rate loan! Where did all the commissions and profits go for all the bad loans they put people in!

[TrojanDLA]

I can only laugh. If I was Mozillo, I would've sold this puppy in 2006 to a private equity group. The key is that he KNEW this whole subprime nonsense was a house of cards. With that knowledge, he should have had an exit strategy. Now, he's going to go down with the boat.

[Mr.Roboto]

>Remember that normal people simply don't >understand legal-ese generally.

Hire a lawyer. Let him/her to translate it for you. Simple.

>Perhaps it was a divorce and he had to refinance to buy >out the ex-wife.

And why should CFC care about this?

>But who wins there. Who, YOU?!!!!!!! Let me clue you >all in on something. There are millions and millions of >Dan's out there and if we let them all suffer their fates, >then you can kiss what is left of our economy good >bye and that does not address the social devastation >that will result from this.

Almost like reading Marx/Engels and their Communist Manifesto.

[fred]

He's actually right. These people are disgusting. They bought homes thinking they were going to flip them in a year and make a nice chunk o' change. They were suckers. Suckers shouldn't be rewarded.

[arroyogrande]

"Why are ALL of you presuming that there was a refi or cashout for frivilous reasons?
The sanctimonious rush to judgement is a rather over the top."

So we can probably agree that he *did* take cash out of his house, correct? What he used it for, we don't know, but we can agree that he got *something* out of the decision to take out the new loan, correct? Perhaps as much as hundreds of thousands of dollars?

"...Perhaps it needed...
...Perhaps he had some massive...
...Perhaps it was a job loss...
...Perhaps it was a divorce...
"

Haven't people been losing their houses due to job loss, divorce, medical expenses, etc. since the beginning of time? Wasn't the last housing downturn in SoCal at least partially caused by aerospace and defense industry jobs disappearing from SoCal? Why didn't we "bail out" these people? And people that lost their jobs in 2001? And 2002? And 2003? Should it become a permanent law that renters and homeowners pay (through taxes) into a "prevent homeowner foreclosure" fund?

I can understand feeling sorry for someone like this, but at some point, the people responsible (both the borrower AND the lender) need to own up to the actions they chose. It's sad that people lose their houses to job loss, divorce, and medical emergencies. However, it has *always* happened that way. If you buy 'something' expensive, use it for collateral on a loan, and then (for whatever reason) can't repay the loan, you may lose that 'something'. Life doesn't end just because you lose that 'something'. You move on, and try again later.

"Some unscrupulous lenders took advantage of people they knew couldn't understand the implications of what they were doing. "

"But they signed because everyone was looking at them as tho this was perfectly reasonable."

I can understand that. However, as I said, "everyone else was doing it" hardly cuts it when you are borrowing hundreds of thousands of dollars. Perhaps it's time that the Real Estate establishment starts educating people that this is a REALLY BIG DECISION, one that you shouldn't flippantly agree to just because "you really *love* that house", or are "really excited about all of th money you are cashing out".

"But who wins there...if we let them all suffer their fates, then you can kiss what is left of our economy good"

You mean the economy of having a negative savings rate, and of our fellow Americans (aka "consumers") buying more and more stuff on credit while wages stagnate, getting more and more in debt buying stuff with money we borrow? You mean THAT economy?

I'm sorry, but that economy - that Ponzi/pyramid scheme of consumers using credit to buy stuff they cannot afford, creating profits in the lending and investment industry, and thereby loosening up even more credit for people to take out and buy more stuff, and so on and so on - is gone. Get used to it.

The sooner we get ourselves to a sustainable economy, the better.

"The sociological impact on families and communities from this is just devastating. That's what it really all comes down to in the end, the impact on our society as a whole"

What sociological impact? Families losing houses will survive. They will get by. People (including myself) will and do help them. Losing a house is painful, distressing, and embarrassing. However, as all of us would agree, "it's not the end of the world". You can rebuild and move on from it. Yes, it's hard. Yes, it requires work and sacrifice. Yes, it will be a while before you can again afford a new car or a plasma TV. But families can and will get past it.

And maybe, just maybe, people in our nation will learn not to take borrowing hundreds of thousands of dollars so flippantly or lightly.

- arroyogrande

[Aldo818]

Wow, there seems to be a lot of soap box preachers here that like to talk about personal responsibility.

Do any of the "personal responsibility experts" here have anything to say about a company that lended out it's shareholders money to people that couldn't pay it back?
Can you say something about the lending industry ignoring the fact that incomes in there main markets did not match the loan amounts?
How about continuing to lend outrageous amounts despite many experts and Economists declaring that the American consumer has never been under more debt for the past 3-4 years?

I would have to agree that there is some lack of personal responsibility on a lot of borrowers. However, every agent, broker and bank knows that they cannot loan money out to just anyone that asks.
It is the responsibility of this trio of players to make sure that they lend money to only those that can afford to pay the loans back. That is their responsibility to their coworker, employees and shareholders. I see a lack of personal responsibility in the leadership of those institutions.

"Disgusting?" Does anyone think that it is disgusting to watch Mozillo swimming in his billions of dollars as thousands are laid off from his company?

There was a point when I believed in what CW was doing for the average Joe. Maybe the problem was that leadership just got too greedy. And now, the average Joe is up **it creek.

[The Duke of Moral Hazard]

Habib, Gina, you really don't get it? Habib, I think our society, in general, blames the drug dealer much more than the user. You cut off the supply, you have no more users; you attack the users, it just gets worse.

"Just makes me sick." Hey, you and Mozilo both feel sick over this. Great minds think alike?

Gina, your kool-aid... oh for Pete's sake... girl you've been brainwashed. If they wanted to maintain underwriting standards, they would have. They didn't. Repeating back what you heard at the department meetings really doesn't change things.

"I feel that throughout our 40 years we have always been guided by our desire to make a positive difference in the lives of the American people, our employees and our shareholders."

Yah, Angelo says the same things when he testifies before congress... pretty hollow at this point, what?

"We all worked hard to lower the barriers of entry into homeownership for lower income and minority first time homebuyers."

Well gosh geewillakers, maybe this marketing slogan reflects part of the problem. Let anyone borrow money, then pass on the risk to the taxpayer, and guess what... doesn't work out so well, DOES IT?

Sharon: "At the risk of getting yelled at here, when I bought my house 15 years ago, I didn't understand the paperwork I was signing." Don't feel bad at all -- I've known good attorneys (even real estate attorneys) that didn't undrestand portions of loan documents.

Maggie: "you can refinance to a fixed rate six months to a year " This was pretty common during the refi craze. It was called churning. They didn't need a team as individual loan officers & brokers would give someone a cash out refi, wait a few months, call em again, give em another one, etc.

[Not Warren Buffett]

It appears that the borrower is one of those who tapped into the equity of the rising home prices and have now been stung by the fact that: He has to pay back money on a loan that he agreed to.

I guess the borrower thought that home prices would continue to appreciate at 20% a year, forever, and that he could keep tapping into his home's equity, forever.

Mozilo is right, disgusting behavior on the part of wreckless borrowers.

[Free Loss Mitigation Housing Counseling]

I just want to remind folks that none of us are immune from a financial hardship. It takes a long time to payoff a mortgage and most of us are only a pay day away from being in default. The savings rate in our country is at a negative and "none of us" have job security. We can't point fingures and we have to work together to help people stay in their homes and help mitigate foreclosure losses for the lender, and the blyte foreclosures bring to our community. For free loss mitigation counseling email me at do@securecollateral.com.

[Phyllis Harb]

Yes, the homeowner spent his equity and yes that was irresponsible.

But it IS likely that he really didn’t understand the loan and the ramifications. When was the last time you signed a set of loan documents from a lender? They are unbelievably complex; I am in the business and it is difficult for me to understand. Compound that with new and inexperienced loan people – it was a recipe for disaster.

[JPG]

gina r.:

Did you work in the PR department at Countrywide? Or did you just leave the company before they started pushing adjustable rate interest-only liars loans and relaxed their loan standards to the point where my three-year-old daughter could have qualified for a $500,000 mortgage? Because your version of a responsible Countrywide doing the right thing just doesn't match with the very well documented reality of a company that, if it wasn't leading the charge to give money to anyone who asked, at least was following everyone other lender down that path. The number of defaults and foreclosures they have had, without some horrible economic down turn causing them, is further proof that Countrywide was giving tons of money to people they should have known could never pay it back. Just from a business standpoint that doesn't sound like doing the right thing to me.

Habib:

While there may be stockholders, employees and ex-employees of Countrywide who are hurting these days, I guarantee you Angelo Mozillo is not one of them. Sure his remaining stock and options are now worthless, but he banked a lot of cash in the last few years (from the outside it sure looks like he saw this coming and started dumping stock as fast as he could). We will probably never know the whole truth, but it appears he was gambling just like everyone else who got caught up in this mess. Only difference is he had inside info that helped him cash out his chips before they became worthless.

[JEremy R]

I really believe there should be government intervention to prevent this from happening again.

I don't want a bailout, but I am starting to believe that some people did get duped, and that isn't right.

The government should do the following.

1) Unsolicited selling of mortage products should be regulated. Anyone selling a mortgage product should be forced to register with the government and get an ID number and mortgage product number. If someone is solicitied for ANY mortgage product, they should be able to go onto a government website, enter the ID numbers, and get a full unbiased opinion on the risks/benefits of the product, and full statistics.
2) First time home buyers (especially those with poor credit) should be forced to take a short online course/quiz, or at least watch an online video.
3) THe mortgage broker should be forced to read warnings about their financial product and home ownership, and they should be forced to tell people that interest rates can increase suddenly, or that prices can fall in value causing all sorts of problems. They should give SPECIFIC examples of when BOTH of these things occured in the US. They should also specifically single out NYC, SF, LA, Chicago. This will refute the whole "They aren't building any new land" crap.

There should be a federal minimum standard, but states like NY, CA, and Florida should be allowed to set a standard higher than the federal level.

I think if that happens, then there shouldn't be a bailout.

I truly believe that some people did get screwed, but I am against a wide spread bailout.

[Cal]

DQ CAR city stats are out:
http://tinyurl.com/5ouyry

Monthly stats are highly variable both in price and volume and without historical context they can be pretty meaningless. Regardless people will use them to justify whatever opinion to which they are currently wed.

[bkl]

Here is the beginning of his email. He mentions his "original" loan. There is no mention of a refi. Did the "bottom fall out" in 1993 or did he pay cash in 1992 and take his original loan in 2006? Not likely.

"To Whom It May Concern:

I am writing this letter to explain my unfortunate set of circumstances that have caused me to become delinquent on my mortgage. I have done everything in my power to make ends meet but unfortunately I have fallen short and would like you to consider working with me to modify my loan. My number one goal is to keep my home that I have lived in for sixteen years, remodeled with my own sweat equity and I would really appreciate the opportunity to do that. My home is not large or in an upscale neighborhood, it is a “shotgun” bungalow style of only 900 sq. ft. built in 1921. I moved into this home in May of 1992…this was the same year I got clean and sober from drugs and alcohol, and have been ever since, this home means the world to me.

The main reason that caused me to have a hardship and to be late is my misunderstanding of the original loan. I was told that after the first year of payments, I would be able to refinance to a better fixed rate- then the bottom fell out of the industry. My payments for that first year were on time. I also lost my second income due to physical conditions in a very physically demanding industry. "

[Arti]

I TOOK OUT THE EQUITY IN MY HOUSE TO BUY A HUMMER, AND NOW THEY TELL ME I HAVE TO PAY THE FULL MORTGAGE BECAUSE PRICES WENT DOWN! PLEASE MOZILLO GIVE ME MORE MONEY! PLEASE HILLARY BAIL ME OUT!

[sww]

It is hard for the average consumer to understand language written by lawyers and business people bent on getting money any way they can. Banks only care as long as a signature is on a piece of paper. You can't hire a lawyer to be on your side unless you have money to give. Even college educated people cannot understand the massive amounts of papers that are required to buy a home. When are we going to get back to sanity? Judging from this mess, a long time coming.

[gina]

Kool aid?? Not me, I call things the way I see them and was never intimidated or brainwashed by Angelo or anyone else. The US governement pushed lenders to make loans more affordable , monitered and censored lenders. These loan programs were approved and sold to FNMA and FHLMC. First time home borrowers were given the benefit of credit counseling and terms of the transaction disclosed.

A borrower would apply for a refinance or Heloc and if the appraisal came in low would argue the value. They pulled every dime they could to go on vacation, put in a pool, buy a pony or take the family to Hawaii on vacation. It was their "savings account" and people spent it like crazy. Let's face it, the vacation lasts 2 weeks and you are going to borrow and pay 30 yrs for it? That is crazy!

A very high percentage of the loans in foreclosure are investors and "second homes", right.. A second home that you rent two days after closing.. Lied to get the loan.... No experience in property management, you live a distance away, you don't even hire a property manager. Your tenants trash it, don't pay the rent and then you call CFC and confess that you lied and can't make your payment?

I can tell you horror stories on some of the most stupid reasons why people quit making their payments. Ghosts, snakes, girlfriends, incarceration, I lied about my income because the realtor told me to.

I have seen CFC give forebearance on legitimate reasons for years. When a borrower with a valid issue would make an effort and commit to a payment plan the loan could be brought current and go forward. You want some advice? Don't hide from your lender if you get in trouble, communication is the key to success in working out your problem. Tell the truth and see what solution there is.