|
|
-- Fannie whack: Fannie Mae reports a bigger-than-expected $2.3-billion loss and says mounting  mortgage defaults mean more losses are on the way. The hemorrhaging, coupled with Freddie's equally grim earnings report Wednesday, are ratcheting up talk of a taxpayer, er, government bailout.
-- Mozilo gone but not forgotten: The Times reports that regulators have stepped up their investigation of Countrywide Financial Corp. -- now part of Bank of America -- and are probing whether ex-CEO Angelo Mozilo violated insider-trading laws.
-- Saints and sinners: Fortune has a snappy photo gallery highlighting eight players who saw the credit crunch/mortgage mess coming and eight who didn't. No big surprises -- Mr. Mozilo pops up on the "didn't" list -- but interesting viewing nonetheless.
-- Latest foreclosure stats: Mr. Mortgage at Implode-O-meter gets a jump on parsing July foreclosure data from for-profit foreclosure research outfit ForeclosureRadar, via Patrick.net.
-- Annette Haddad
Photo: Getty Images
Tips? Email annette.haddad@latimes.com
The Times' Kathy Kristof reports that departing Countrywide President David Sambol will be using the embattled mortgage lender's corporate jet to take his family on a three-week vacation in Africa, according to a source close to the company.
Sambol, who was among those axed by new parent Bank of America, wouldn't confirm or deny the trip.  He tells Kristof: "This is a personal matter involving my family and I would like to protect my privacy," Sambol said, adding that "everything I am doing is in connection with my agreements with the company."
When BofA's purchase of Countrywide was first announced, it looked like Sambol, 48, would be staying on as head of the mortgage division -- effectively taking over for Angelo Mozilo, Countrywide's founder and CEO. But then BofA revoked the decision before the deal was completed this summer.
Sambol, who earned $10.3 million last year, will be getting a $28-million severance package, plus a host of fringe benefits, including access to the company jet for both business and personal travel as long as he is employed, Kristof reports. He is leaving the company shortly.
BofA had no comment.
-- Annette Haddad
Photo credit: Countrywide
Questions? Comments? E-mail: annette.haddad@latimes.com
Lender woes continue to mount.
Richard Schmitt reports today that a federal grand jury in L.A. has started probing three fallen hometown lenders and their subprime loan activities.
Subpoenas have been issued in recent weeks and months to Countrywide Financial Corp., which is now part of Bank of America, New Century Financial Corp., which is under Bankruptcy Court protection and IndyMac Bank, which was seized by federal regulators two weeks ago.
The question seems to be whether fraud and other crimes contributed to the national mortgage debacle. But several sources quoted by Schmitt suggest that the complexity of building cases against the companies may be very difficult for the feds to make. "What they may find is a lot of incredibly sloppy practices that are not necessarily criminal," says Bert Ely, a Virginia-based banking consultant.
A Business section feature on Newport Beach-based Downey Savings & Loan sets up the thrift's dismal news today of another quarterly loss and a growing number of bad loans on its books. The results sent the CEO and board chairman packing.
Some lenders seem to be dealing with their builder clients as they are their home-loan customers. The Times' Peter Hong talks to some local builders who say that banks are making it difficult for them to work out their  faltering loans, which could lead to defaults and bankruptcies. Many builders will go under, [Barratt American president Mick] Pattinson said, because "banks aren't supporting businesses that supported them for decades."
Maybe the building industry will need its own congressional rescue similar to the one the White House has now agreed not to veto. The House housing rescue bill approved yesterday would stave off foreclosure for hundreds of thousands of homeowners.
-- Annette Haddad
Photo credit: Mark Boster / Los Angeles Times
Questions? Comments? Email annette.haddad@latimes.com
A California Court of Appeal judge whose mortgage was personally approved by former Countrywide Financial Chief Executive Angelo Mozilo later ruled in favor of Countrywide in a class-action lawsuit, Portfolio magazine reports in its latest issue.
Portfolio's Dan Golden reports that Richard Aldrich, a California Court of Appeal judge, went to Countrywide in 2004 to refinance the loan for his 8,200-square-foot house in Westlake Village; his application, assigned to loan officer Robert Feinberg, sought a $1-million loan and a $900,000 line of credit, the magazine reports.
Portfolio: "By email, Feinberg alerted Mozilo that the credit line was 'above what guidelines allow.' Mozilo responded, 'Go ahead and approve the loan, and close it as soon as possible. Don’t worry about this deal, it’s golden.' Countrywide further waived half a point, or $5,000 on the million-dollar loan."
More: "That wasn’t Aldrich’s only contact with Countrywide. At the time he refinanced, a class-action lawsuit against Countrywide was pending before the appellate court, brought by borrowers contending that the company offered an inadequate payment to settle allegations that it charged excessive fees for credit reports. That August, Aldrich was part of a three-judge panel that unanimously rejected the borrowers’ appeal."
Portfolio reports that Aldrich, in a brief telephone exchange with the magazine, denied that he had received a below-market rate on the loan and then hung up. The magazine reports he did not disclose his relationship with Countrywide to plaintiffs in the class-action suit.
The entire article is worth a look, it sheds new light on the "friends of Angelo" connections, and names a few more beneficiaries of Mozilo's personal attention, including CNN commentator Paul Begala. In one internal exchange, a Countrywide executive urges special treatment for a congressional staff lawyer on a committee overseeing housing issues. The internal guidance on handling the lawyer's loan includes the phrase, "No garbage fees."
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Hat tip: Patrick.net
Countrywide Financial lost $2.33 billion in the second quarter, its new owner, Bank of America, reported today. From the New York Times: "Countrywide Financial, which Bank of America formally acquired on July 1, reported a net loss of $2.33 billion in the second quarter. That included just under $4 billion in losses tied to mortgages, home equity and other loans. But investors fear that those losses could spiral higher, and Bank of America could face billions in costs from protracted legal battles."
More: "But on Monday, Bank of America said that the deal was ahead of projections. Bank of America said it now expected Countrywide to bolster its 2008 profit after raising its projections for cost savings and making certain accounting adjustments."
Countrywide's recent earnings/losings history:
1Q 2007: Earned $434 million
2Q 2007: Earned $485 million
3Q 2007: Lost $1.2 billion
4Q 2007: Lost $422 million
1Q 2008: Lost $893 million
2Q 2008: Lost $2.33 billion
Posted by Peter Viles
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
No sooner had I taken another shot at Countrywide Financial than I saw this -- a defense of former Countrywide CEO Angelo Mozilo on the Huffington Post, written by his sister, Lori.
The full title Lori Mozilo's post is "Vilified: What you don't know about my brother, Angelo Mozilo."
The gist is: My brother was in the mortgage business to help hard-working, middle-class people get loans to buy houses, and he's not a crook, and shame on Congress for treating him like one.
The newsiest part, to my eyes anyway, was her description of the "Friends of Angelo" program. She writes that the program was real and hardly scandalous: "Will all
FOA's please stand up? They will include: strangers, Senators,
neighbors, cab drivers, doormen, nannies, even a sister or two. FOA was
the name given to Angelo's personal pipeline of loans because he didn't
work out of a branch office. And yes, he did give deals. Not illegal,
shady deals, just plain old American, good deals. ... I know,
it's not sinister or interesting, but it's the truth."
Posted by Peter Viles
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Photo Credit: Getty Images
 Worth noting from today's Wall Street Journal, an article gives a glimpse at just how bad the underwriting at Countrywide was in the company's final years as an independent company:
New information about Countrywide loans in an amended complaint brought by the state of California against Countrywide "... provide(s) a close look at the 158,000 mortgages that had been slated for sale by Countrywide Home Loans before last summer's credit crunch," the Journal reports. "Nearly 48% of non-prime loans and 21% of pay-option adjustable-rate mortgages in that portfolio were in some stage of delinquency or foreclosure..."
A spokesman for Bank of America, which now owns Countrywide, tells the Journal 9.53% of all loans owned by Countrywide were 30 days or more past due as of the end of April.
-- Peter Viles
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo: Associated Press
 This may be old news to some of you, but it was news to me: Bank of America "plans to dump the Countrywide name early next year."
This from today's L.A. Times: "... Bank of America still plans to dump the Countrywide name early next year in favor of the Bank of America brand, Bank of America CEO Lewis confirmed in an interview with The Times."
More: "Lewis initially said he wanted to study whether to keep the Countrywide brand, which was extremely well recognized even if it was tarnished. 'I went in thinking that there would be some way to use the Countrywide name,' he said Wednesday. But as the mortgage meltdown worsened, with Countrywide at its center, that possibility disappeared."
As I say, some of you may have known this, but I had thought B of A would find some value in the Countrywide name.
Comments? Thoughts? E-mail story tips to peter.viles@latimes.com
Photo: Associated Press
News item: The Bank of America purchase of Countrywide Financial has closed, bringing the lender's life as an independent company to an end. The New York Times values the deal at about $4.35 per Countrywide share, or about $2.5 billion. The deal was originally valued at $4.1 billion when it was announced in January, but Bank of America stock has declined quite a bit since then, decreasing the value of the buyout. Hey, things happen.
Relatedly, the Los Angeles Times peels back the onion a bit more on Countrywide's VIP loan program, reporting on one borrower who "says he sought no favors." Commenter Sheila pointed this out earlier today, arguing it calls into question previous reports here and elsewhere about various prominent Democrats who enjoyed special Countrywide attention. Or, as Sheila put it, "that might mean that all the Democrats you swift-boated in this blog might not be completely corrupt after all."
I'll agree they're not "completely corrupt," but I believe the story that they received special treatment is important and revealing. It reveals that prominent members of Congress receive special treatment. In my world that's news. So Sheila and I disagree. I would say we disagree respectfully, but I don't want to put words in her mouth.
But I digress. The most interesting thing about this latest glimpse into the VIP loan program at Countrywide is the story of the loan in question: A guy borrows less than $1.2 million to buy a house in the summer of 2004. Four months later, Countrywide appraises the same property at $1.5 million -- up more than 25% in four months -- and refinances two original loans so that the borrower can cash out $156,000 in home equity. Who was the borrower? Ross C. DeVol, director of regional economics at the Milken Institute, a Santa Monica think tank. Now that's appreciation. And customer service. Through a spokesman, DeVol told the Times he never asked Countrywide for any favors.
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo Credit: Countrywide co-founder Angelo Mozilo, by Getty Images
 Here's video I'd like to see: Countrywide Financial employees and shareholders gave chairman Angelo Mozilo (pictured) a standing ovation today, and Mozilo "fought back tears" at a shareholders meeting to approve the sale of the company, according to Reuters.
Here's more: "Scott Adams, coordinator for a pension program of the American Federation of State, County and Municipal Employees, said the Countrywide shareholders meeting lasted fewer than 20 minutes and had about 300 attendees, including many employees.
"He said Mozilo, 69, entered to a standing ovation, and then fought back tears in recalling how he had received a loan from Bank of America to help co-found Countrywide.
"Mozilo, the son of a Bronx, New York, butcher, said he felt emotional because of his Italian heritage, Adams said."
I doubt that shareholders or Mozilo discussed the new lawsuits against the company, filed by attorneys general in California and Illinios.
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo credit: Getty Images
 News item this morning from the L.A. Times: "Countrywide Financial Corp. and its chief executive, Angelo Mozilo,
were sued today by California Atty. Gen. Jerry Brown, who accused them
of forcing thousands of Californians into foreclosure by deceptively
marketing risky adjustable-rate mortgages to borrowers who didn't
understand that their monthly payments would one day 'explode.'
"In a complaint filed in Los Angeles County Superior Court, Brown
alleges that Countrywide and its top executives, beginning in 2004,
plotted to loosen or ignore lending standards so they could make more
sub-prime mortgages and other adjustable-rate loans that were promoted
by emphasizing low initial rates.... Countrywide spokesman Rick Simon said the company would have no
immediate comment on the lawsuit. The mortgage lender, the nation's
largest, is expected to face a similar suit today in Illinois."
The New York Times first reported the Illinois lawsuit last night.
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo Credit: Los Angeles Times
News item from the New York Times tonight: "The Illinois attorney general is suing Countrywide Financial, the troubled mortgage lender, and Angelo R. Mozilo, its chief executive, contending that the company and its executives defrauded borrowers in the state by selling them costly and defective loans that quickly went into foreclosure."
More: "The lawsuit, which is expected to be filed on Wednesday in Illinois state court, accused Countrywide and Mr. Mozilo of relaxing underwriting standards, structuring loans with risky features, and misleading consumers with hidden fees and fake marketing claims, like its heavily advertised 'no closing costs loan.' Countrywide also created incentives for its employees and brokers to sell questionable loans by paying them more on such sales, the complaint said."
The report says Countrywide did not immediately respond to an e-mail seeking comment.
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
The editorial page at Investor's Business Daily today joins with the Wall Street Journal in asking for a full investigation of the "sub-prime six" -- the six named movers and shakers, among them two Senate Democrats, who received special attention from Countrywide Financial because of their VIP status.
For the record, those named in media reports as "Friends of Angelo" -- Countrywide Chairman Angelo Mozilo -- are Democratic insider James Johnson, formerly an advisor to the Obama campaign; Democratic Sens. Chris Dodd of Connecticut and Kent Conrad of North Dakota (pictured); former Health and Human Services Secretary Donna Shalala; former U.N. Ambassador Richard Holbrooke; and former Secretary of Housing and Urban Development Alphonso Jackson. If you are keeping track, five of the six are Democrats.
IBD: "The Democrats' initial response has been to stall. They hope the
problem will disappear until after the election. Given the media's lack
of curiosity so far — a small handful of news organizations, including
our competitor, the Wall Street Journal, have pushed this story ahead —
it looks like the Democrats might get their wish.... These revelations suggest that, at the very least, the Democratic
Party is afflicted with a kind of corruption that taints all recent
decisions on the sub-prime crisis. They need to investigate it fully,
immediately and without prejudice — or risk having it blow up in their
faces."
Bloviation: Why the lack of media curiosity? My gut tells me the mainstream news media would have much more enthusiasm for the story if it had been broken by The New York Times and had begun with a sweetheart deal for a top campaign advisor to John McCain and had then spread to two Republican U.S. senators. That's just my two cents.
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Photo Credit: Associated Press
Hat tip: Pseudo 100, via e-mail
 The Wall Street Journal -- correctly, it says here -- today is pushing Congress to investigate the "friends of Angelo" loan program, under which members of Congress including Sen. Chris Dodd (D-Conn.), at right, received special treatment and special loans from Countrywide Financial.
This is the same issue that brought down Obama campaign adviser Jim Johnson, another recipient of personal attention from Angelo Mozilo and Countrywide.
The Journal's editorial page this morning: "What did Countrywide CEO Angelo Mozilo receive –- or think he would receive –- in return for the friendly loans to politicians? And what did Mr. Mozilo get –- or think he would get –- in return for sweetheart loans to Fannie Mae CEOs Jim Johnson and Franklin Raines?" (Link credit: LA Biz Observed)
The Journal brushes off the so-called "ostrich defense" employed by another Countrywide borrower in the Senate, Kent Conrad (D-N.D.), who oddly told reporters he had never met Mozilo -- even though he had talked to Mozilo on the phone about a loan. "For what other reason, besides preferential treatment, would one call the CEO of the mortgage company? Does Mr. Conrad call August Busch IV when he wants to buy a six-pack?"
Also offended by Conrad's awkward dance of denial is one of my favorite real estate bloggers, Diana Olick of CNBC: "So am I to believe that these high-ranking senators and a former Fannie CEO didn’t read their loan documents to figure out that they were getting a special deal?? Did they not know enough about how mortgages work to figure it out? And why would Mozilo give these folks a special deal if he didn’t expect them to at least know about it??
"The senators are claiming they had no idea. Come on. I realize I’m supposed to accept that all those subprime borrowers didn’t understand their loans, but to accept that these well-educated leaders of our government didn’t -- well that insults my intelligence, and every borrower’s out there."
Your thoughts? Comments? E-mail story tips to peterviles@latimes.com.
Photo: AFP/Getty Images
 To quote my favorite comment of recent days, "You cannot stop Angelo Mozilo, you can only hope to contain him."*
From Portfolio.com today: "Two U.S. senators, two former Cabinet members and a former ambassador to the United Nations received loans from Countrywide Financial through a little-known program that waived points, lender fees and company borrowing rules for prominent people."
Backstory: This appears to be the same "friends of Angelo" program in which former Obama campaign adviser Jim Johnson participated. Angelo being, of course, Countrywide Financial co-founder Angelo Mozilo.
More from Portfolio: "Senators Christopher Dodd (pictured), Democrat from Connecticut and chairman of the Banking Committee, and Kent Conrad, Democrat from North Dakota, chairman of the Budget Committee and a member of the Finance Committee, refinanced properties through Countrywide’s 'V.I.P.' program in 2003 and 2004, according to company documents and emails and a former employee familiar with the loans.
"Other participants in the V.I.P. program included former Secretary of Housing and Urban Development Alphonso Jackson, former Secretary of Health and Human Services Donna Shalala, and former U.N. ambassador and assistant Secretary of State Richard Holbrooke. Jackson was deputy H.U.D. secretary in the Bush administration when he received the loans in 2003. Shalala, who received two loans in 2002, had by then left the Clinton administration for her current position as president of the University of Miami. She is scheduled to receive a Presidential Medal of Freedom on June 19."
Crazy, huh? Say this for Angelo Mozilo, the butcher's son: He learned how the game is played in Washington, and he played it well.
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo Credit: AFP/Getty Images
*For those who don't know, that line from ESPN's Sportscenter, for reasons to juvenile to go into, is considered by many American males to be the wittiest line of the past generation.
 Two degrees of separation: The Wall Street Journal reports that a very special friend of Sen. Barack Obama is also a very special friend of embattled Countrywide Financial co-founder Angelo Mozilo.
The Journal reports that James Johnson -- a high-ranking advisor to Obama -- was part of an elite group -- "friends of Angelo" -- who got more than $7 million in special loans from Countrywide.
The New York Sun spells out details here: "James Johnson, one of three people tapped by Mr. Obama recently to
oversee the search for his running mate, took at least five real estate
loans totaling more than $7 million from Countrywide Financial Corp.
through an informal program for friends of the company's CEO, Angelo
Mozilo, the Wall Street Journal reported Saturday."
More: "The Journal said at
least two of the mortgages, among a series of loans made available to
people Countrywide officials called "friends of Angelo," were at rates
below market averages, though it is difficult to predict a market rate
without access to nonpublic information about a borrower's credit
history and other factors that can reduce interest charges on a loan."
About James Johnson: He's part of the permanent government of this country, a long-time Democratic fixer (Mondale and Kerry campaigns), former CEO of Fannie Mae, and as such a big buyer of Countrywide loans. He's a guy who sits on a bunch of corporate boards, etc.
Outrage: "That reeks most high," said Bonnie Russell, a public relations specialist and vocal critic
of Mr. Mozilo, according to the Sun. "Where's the
'change to believe in' if they're playing the same old game using the
same old players?"
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Photo Credit: A.P.
Hat tip: BR, via e-mail, mylessthanprimebeef
News item from Scott Reckard of the L.A. Times: "Showing Countrywide Financial Corp. President David Sambol the door,
Bank of America Corp. said today that it would appoint one of its own
top executives to oversee mortgage operations after completing its
acquisition of Countrywide."
More: "When it announced in January that it would buy struggling Countrywide,
Bank of America said that Sambol, the No. 2 executive to Countrywide
founder and Chairman Angelo Mozilo, would stay on to run the nation's
largest home-loan operation from Calabasas, where Countrywide is based.
"But that role will now be handed to Barbara J. Desoer, Bank of
America's chief technology and operations officer and a member of the
bank's management operating committee."
From the BofA press release: "She will be based in Calabasas, California. David Sambol, president of
Countrywide Financial Corporation, will retire after assisting Desoer
with the transition."
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
 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
 News worth noting: "Directors and officers of Countrywide Financial, the beleaguered mortgage lender, must answer shareholder accusations of insider trading and an overall failure to monitor lending practices that led to the company’s collapse, a federal judge in California has ruled."
More, from The New York Times: "Rejecting the arguments of Countrywide executives and directors that they were unaware of lax loan operations that led to ballooning defaults, Judge Mariana R. Pfaelzer of Federal District Court in Los Angeles ruled Tuesday that she found confidential witness accounts in the shareholder complaint to be credible and that they suggested “a widespread company culture that encouraged employees to push mortgages through without regard to underwriting standards.”
The law firm suing Countrywide has posted the ruling on its Web site, you can read it here.
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Photo Credit: AP
 News item from Bloomberg News: "Countrywide Financial Corp. has suspended the home equity credit lines of almost all its Las Vegas customers..."
More: "Since January, Countrywide, Bank of America Corp., Washington Mutual Inc. and IndyMac Bancorp Inc. have frozen about 600,000 equity credit lines nationwide, said Michael Kratzer, president of a Bankrate Inc.-owned website that's fielding consumer complaints. The lenders are targeting borrowers in cities where property values are falling, including Las Vegas, Chicago and Los Angeles, he said."
Coupla thoughts: I receive a couple of e-mails a week -- usually from WaMu borrowers -- who complain that their HELOC has been unfairly, or unwisely, frozen because of declining home prices. Sorry to say, but from the perspective of the lender, these freezes make good sense. Home prices are falling rapidly; it doesn't make sense to loan against a declining asset. That kind of lending in this environment would be, to use a technical banking term, stupid.
This is particularly true in the case of Countrywide: the time to stop making dumb loans is now. A note to the readers who know for a fact that your case is the exception to the rule, that you have equity to borrow against and you're a good credit risk: It doesn't matter. If Countrywide lends to a thousand people like you and four of those loans go bad, that is four too many.
Also: This is what the Fed is up against. Credit is tightening, regardless of how steeply the Fed cuts interest rates, and how many billions of dollars it shoves into the pockets of banks, investment banks, convenience stores and car dealers. (OK, I made that part up. The Fed isn't giving loans to convenience stores and car dealers. Yet.)
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Photo Credit: AFP/Getty Images
 It's all about walking away these days, isn't it? Homeowners are walking away from their mortgages, Microsoft walked away from Yahoo, and now an analyst is encouraging Bank of America to walk away from its deal to buy Countrywide Financial.
From CNBC.com: "Friedman, Billings, Ramsey analyst Paul Million said continued deterioration in the mortgage market, and weak pricing for nontraditional loans in the investment market, mean Bank of America would have to take between $20 billion and $30 billion in writedowns when it closes its acquisition of Countrywide."
More: "'Bank of America should completely walk away from the Countrywide deal, as Countrywide's loan portfolio will prove a drag on earnings and could force Bank of America to raise additional capital,' Miller wrote in a research note."
Not just walk away, but completely walk away.
Random follow-up: After hosting a weekend playdate for six kids, ages 1 to 4, I have new insight into B of A's statement last week that it might not stand behind Countrywide's debt. You see, the six kids watch each other closely to see what's available, treat-wise, and who's getting it. Juice boxes? Pancakes? Syrup? Once one kid gets a treat, out go the lower lips of the other five until they get theirs.
Bank of America, every bit as watchful as your average 4-year-old, wants what one of the other kids already got. The other kid is J.P. Morgan Chase, and it got a sweet deal from the government when the Fed guaranteed Bear Stearns debt. In this case, B of A is eyeballing the debt as a toddler would broccoli, saying, "I don't want yucky debt and I won't eat it! Jamie Dimon didn't eat his!"
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Photo Credit: AP
 News item from Bloomberg News: "Countrywide Financial Corp.'s credit rating was cut below investment-grade status by Standard & Poor's Corp."
That would be junk to you and me.
More: "The revision reflects 'the new level of uncertainty as to the ultimate legal status of Countrywide's creditors' after the lender's sale to Bank of America Corp., Standard & Poor's said in a release today.
The revision also reflects this piece of news today, also from Bloomberg: "Bank of America, the second-
biggest U.S. bank, said it may not guarantee $38.1 billion of Countrywide Financial's debt after taking over the
mortgage lender, increasing the likelihood of a default. 'There is no assurance that any such debt would be
redeemed, assumed or guaranteed,' the bank said in an April 30
regulatory filing..."
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo Credit: AP
 From Reuters: "Countrywide Financial Corp. Chief Executive Angelo Mozilo (pictured) realized $121.5 million from exercising stock options and was awarded $22.1 million of compensation in 2007, a year when the U.S. housing slump pummeled the nation's largest mortgage lender."
More: "Mozilo, long criticized for his compensation packages, realized the option gains by acquiring and selling 4.92 million shares under a pre-arranged trading plan, Countrywide said in a Thursday filing with the U.S. Securities and Exchange Commission. ... Mozilo's compensation fell 49% from a reported $43 million in 2006. The bulk of his 2007 compensation was from $20 million of stock and option awards made early in 2007, before borrower defaults soared and liquidity grew tight."
My two cents: Man, that's more money than the Clintons made!
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo Credit: Bloomberg News.
News item from the L.A. Times: "The top two executives of beleaguered Countrywide Financial Corp. will pocket $19 million in stock next week, according to a regulatory filing. It's the start of a series of multimillion-dollar payments expected to go to the pair before and after the company's pending takeover by Bank of America Corp."
More: "The largesse for Countrywide Chief Executive Angelo Mozilo and President David Sambol drew immediate fire from Sen. Charles E. Schumer (D-N.Y.), a member of the Senate Finance Committee, whose members have been debating the merits of a government bailout of consumers and mortgage lenders caught in the sub-prime meltdown.
"It's perverse [emphasis added] for Bank of America to reward the principal architects of the bad business practices that caused this housing crisis," Schumer said in a statement. "Bank of America will hopefully correct the bad practices Countrywide put in place. But enriching people who specialized in deceiving borrowers for the sake of their bottom line will not help that cause."
Also: "Bank of America Corp. will pay $28 million to Countrywide Financial Corp. to chief operating officer David Sambol to retain him as head of the merging companies' consumer mortgage operations."
The headline is a cheap shot, I'll admit -- anytime you're quoting Chuck Schumer in a headline, it's a low blow. But in all seriousness: Do you mean to tell me David Sambol is uniquely qualified to lead Countrywide after Bank of America buys it? I mean, I'm sure he's good at his job. So was Karl Dorrell, but UCLA found another football coach. So was Grady Little, but the Dodgers found another manager.
This is the Countrywide management team that says no one predicted the mortgage crisis; these are the guys who said last summer that Countrywide would benefit from the mortgage meltdown. Then they went out and lost $1.2 billion in the third quarter, lost $442 million in the fourth and sold the company for a fraction of its previous value. And this is the very best management team Bank of America can find?
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com
 Reports over the weekend that Countrywide faces an FBI investigation for possible securities fraud are causing some investors to doubt that Bank of America will purchase Countrywide.
Reuters: Countrywide Financial Corp
shares fell more than 12.5 percent on Monday following reports
it was being investigated by the Federal Bureau of
Investigation for possible securities fraud."
More: "The decline came amid growing fears that Bank of America
Corp, which agreed in January to buy the largest U.S.
mortgage lender for $4 billion, might renegotiate or abandon
the purchase, which it has said it expected to close in the
third quarter." Reuters quotes a Bank of America spokesman saying the deal is "on track."
That's not what the market is saying today. At 11:30 a.m., Bank of America shares were trading at $35.32. The takeover offer is .1822 B of A shares for every Countrywide share, which translates to an offer of $6.44 this morning. Countrywide shares are trading well below that amount -- at $4.41. That's a discount of 31.5% below the offer. The discount on Friday was 24%. Translation: investors have doubts about this deal.
Analysis: If Bank of America doesn't want Countrywide, does anyone want it?
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Photo Credit: Countrywide chairman Angelo Mozilo, by AP
Breaking news: The Wall Street Journal reports that Countrywide Financial is under investigation for "possible securities fraud": "The Federal Bureau of Investigation is probing sub-prime lender Countrywide Financial Corp. for possible securities fraud, according to law-enforcement officials and finance-industry executives."
More: "The inquiry involves whether company officials made misrepresentations about the company's financial position and the quality of its mortgage loans in securities filings, four people with knowledge of the matter said. It is at an early stage, they emphasized."
The Journal quotes a Countrywide official saying the company is unaware of an FBI investigation.
Published reports have said Countrywide and its chairman, Angelo Mozilo, face several other investigations but the words "possible securities fraud" bring the issue to a new level. Potentially, a much worse level for Countrywide. At some point these investigations begin to pose a risk to Countrywide's possible* future owner, Bank of America. With that in mind, it will be interesting to watch the two stocks Monday, to see whether investors begin betting that the Bank of America takeover will not happen.
Has anybody done the math lately on where Countrywide should be trading based on the B of A offer? I'll try to do it later tonight, but no promises. Update: I've taken a stab at the math, and by that math, Countrywide closed Friday at a 24% discount to the Bank of America offer -- hardly a vote of confidence in the deal. Feel free to correct me or second-guess me. Here's my math: the Bank of America offer is .1822 B of A shares for every Countrywide share. B of A closed Friday at $36.74, which gives the offer a value of $6.69. Countrywide, however, closed at $5.07, a discount of 24%.
*Why just "possible" future parent? Because the deal isn't done, and because some of you have predicted here that it won't get done, and you folks have been right often enough that I listen to you.
Comments? Thoughts? E-mail story tips to peter.viles@latimes.com.
Hat tip: MBob via comments.
 Today is Angelo Mozilo's special day to talk to Congress about his paycheck and his company and his unique view of current events. His prepared remarks are here, and this is how CNN/Money is covering the hearing so far:
"Two high-profile former Wall Street CEOs and the head of the nation's largest home lender defended their oversized pay packages to congressional lawmakers Friday, arguing that recent reports grossly exaggerated their compensation in some instances. 'In short, as our company did well, I did well,' Countrywide's Angelo Mozilo (pictured) said."
What struck me in reading Mozillo's prepared testimony was not the stuff about compensation, but his account of the current housing mess: "The problem that we face today was unanticipated and is much more severe than any cycle in the past. ... It bears noting that no one predicted the severity and force of the housing downturn that followed."
Wow. Angelo. What color is the sky in your world? On the planet where I live (nice blue sky today), all manner of people have been predicting a housing crash for years. Lots of them even wrote down their predictions on things called blogs. Have you ever heard of an economist in L.A. named Christopher Thornberg? Books like "Sell Now! The End of the Housing Bubble"? Blogs like Patrick.net?
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Photo Credit: Associated Press
 Someone once said of President Bush's autocratic management style: "When he wants your opinion, he'll tell you what it is."
Evidently Angelo Mozilo (pictured) and his friends at Countrywide Financial also attended the Tell Me What I Want To Hear School of Management. This is from the L.A. Times tonight: "Two consultants hired by Countrywide Financial Corp. raised concerns about Chairman Angelo R. Mozilo's lucrative pay package, but key recommendations were ignored and the company eventually hired a third advisor whose aim was to achieve 'maximum opportunity' for Mozilo, documents show."
More: "The result was a pay contract that 'was significantly more generous to Mr. Mozilo' than originally recommended, according to a report released by a congressional panel Thursday."
It's funny how history changes over time. A couple of years ago, you might have read that the Enron scandal ushered in an era of corporate responsibility and accountability. The problem is, that didn't happen. We all thought it would, but it didn't. Corporate America just keeps on taking care of business. Compensation consultant came in with low numbers? Get another consultant! Same old, same old.
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo Credit: Bloomberg News
 It wasn't long ago that Countrywide Financial said it saw plenty of opportunity in the mortgage crisis. Weak hands would fail, Countrywide said, and Countrywide would benefit.
Times change. From Reuters: "Countrywide Financial Corp., the largest U.S. mortgage lender, said it may see more credit losses as downward trends in the economy and in the real estate market conspire to boost delinquency rates."
More: "In its annual filing with the Securities and Exchange Commission, released on Friday, Countrywide said rising monthly payments on adjustable-rate mortgage loans, also known as ARMs, could also prompt a rise in delinquencies."
Thoughts? Comments? Email story tips to peter.viles@latimes.com
Photo Credit: Countrywide CEO Angelo Mozilo by L.A.Times
 Headline: No Countrywide For Old Men.
Excuse the Oscar pun, but the headline comes from CNBC.com, and I kind of like it.
The latimes.com blog L.A. Now reports Countrywide Financial, clinging to its life as its would-be savior begs for a bailout, has canceled a lavish ski junket in Colorado.
From The New York Times: " ... the besieged mortgage lender, has canceled a gathering of bankers from smaller mortgage banks at the Ritz-Carlton Bachelor Gulch ski resort (where room rates begin at $725), Countrywide said in a statement on Sunday. The company was to pay for 30 invited guests' hotel rooms, meals, skiing and tips."
Countrywide iced the junket only after a public spanking from CNBC. CNBC's real estate blogger, Diana Olick wrote last week, "There's something called remorse. Maybe you've heard of it. Clearly Countrywide Financial is not in touch with that emotion right now."
Hat tip: Better Village
Thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo credit: Countrywide Chairman Angelo Mozilo by L.A. Times.
 The New York Times reports something that commenters here have also been pointing out: Despite a once-in-a-generation housing meltdown, mortgage companies continue to "pump out upbeat advertisements."
"Countrywide Financial brags in its ads that 'No one can do what Countrywide can' and that 'Countrywide can show you the way home.' Wachovia ads feature an 'Approved' stamp prominently at the top, and Bank of America says, 'Homeownership is the best medicine,' the Times reports.
More: "... Bank of America still says in online ads that people should refinance to 'get the cash you need, when you need it.' Many people who are having problems with their mortgage payments are those who took cash out of their homes as their appraisals rose. When asked about the cash-out ad, Joe Goode, a spokesman for Bank of America, said homeowners still have considerable equity in their homes. 'Taking equity out of one’s home is still a smart way for consumers to finance things like home improvements,' he said.
Thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo credit: AP
 Countrywide Financial's monthly report on loan activity shows a continued deterioration in housing: rising levels of delinquency and default.
Doing the foreclosure math: According to Reuters, Countrywide services 9.02 million mortgages and reports 1.05% are "pending foreclosures." That is, by my math, 94,700 foreclosures.
There were signs, however of increased mortage activity. From Reuters via CNBC: Countrywide "... also said average daily mortgage application volume surged 72% from December and mortgage loans being processed rose 46%. This suggests homeowners are taking advantage of lower interest rates to refinance." One analyst calls this a "modest re-fi wave."
Overall mortgage fundings continued to drop in January, though. Countrywide said it funded $21.9 billion of home loans in January, which is down 41% from year-ago levels and down 6% from December levels.
| Month |
Mortgage Fundings |
Delinquencies* |
Foreclosures** |
| March 07 |
$43.2 B |
4.29% |
0.69% |
| April 07 |
$40.5 B |
4.45% |
0.69% |
| May 07 |
$44.4 B |
4.71% |
0.71% |
| June 07 |
$45.3 B |
4.98% |
0.74% |
| July 07 |
$39.1 B |
5.10% |
0.79% |
| August 07 |
$34.4 B |
5.05% |
0.89% |
| Sept. 07 |
$21.2 B |
5.87% |
0.92% |
| Oct. 07 |
$22.0 B |
5.89% |
0.89% |
| Nov. 07 |
$23.1 B |
6.34% |
0.94% |
| Dec. 07 |
$23.4 B |
6.96% |
1.04% |
| Jan. 08 |
$21.9 B |
7.09% |
1.05% |
*Delinquencies as percentage of number of loans serviced
**Foreclosures as percentage of number of loans serviced
Thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Photo credit: Countrywide CEO Angelo Mozilo, L.A. Times
Here's a shocking (no irony intended) piece of news from Countrywide Financial this morning: "Countrywide Financial, the largest U.S. mortgage lender, Tuesday said more than one in three sub-prime mortgages were delinquent at year-end..." Countrywide said borrowers were delinquent on 33.64% of sub-prime loans it serviced as of Dec. 31, up from 29.08% in September, and that said borrowers were at least 90 days late on payments on 17.25% of sub-prime mortgages.
Now, here's a shocking (irony intended) piece of news from Countrywide: The company reported a loss of $422 million, or 79 cents a share, for the fourth quarter. No big surprise here, but the loss was deeper than analysts expected, and Countrywide's most recent guidance had been that it would make a profit in the fourth quarter.
In announcing a $1.2 billion loss in the third quarter, Countrywide said that would be the bottom: "We view the third quarter of 2007 as an earnings trough, and anticipate that the Company will be profitable in the fourth quarter and in 2008," Countrywide president David Sambol said in a press release on Oct. 26. "Over the longer term, we believe that prospects for the U.S. housing and mortgage markets, as well as for Countrywide, remain very attractive."
The L.A.Times reports that, while Bank of America says it has every intention of continuing with its announced purchase of Countrywide, some investors are betting the deal will be renegotiated: "At Monday's closing stock prices, Bank of America's offer was worth $7.50 a share. But Countrywide stock was at $5.95, reflecting sentiment that the price could fall if Countrywide's troubles persisted."
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
 Late news from the AP tonight: "Countrywide Financial CEO Angelo Mozilo, under fire over the size of his potential payout from the proposed sale of his troubled mortgage company, says he is forfeiting some $37.5 million in severance pay, fees and perks he was scheduled to receive upon his retirement."
More: "Mozilo, however, will still retain retirement benefits and deferred compensation that he has already earned, Countrywide said in a statement being released Monday."
Here's the Countrywide press release, in which Mozilo (pictured) says, "I believe this decision is the right thing to do as Countrywide works toward the successful completion of the merger with Bank of America."
The AP figures Mozilo still has roughly $44 million coming to him: "Now, he'll leave with a pension plan and supplemental executive retirement plan that totaled $23.8 million as of December 2006, according to the most recent proxy statement the company filed with the Securities and Exchange Commission. Mozilo also accrued about $20.6 million in deferred compensation, according to the filing."
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo credit: Bloomberg News
Cleaning off my virtual desk, I find a number of Countrywide items. Here they are, in no particular order:
--Frequent commenter Ace opines that the Bank of America buyout of Countrywide will not close. He writes, "B of A stock will drop until they announce the CFC deal is dead." He reminds me to look up Dynegy's rescue of Enron in the fall of 2001. Remember that merger? Of course you don't, because Dynegy backed out.
--Ace also forwards a link to the new anti-Angelo Mozilo website "Disinvite Mozilo," which was launched to protest the University of San Diego's invitation of Mozilo to speak at a real estate conference. Mozilo has since backed out, but the blog lives on. That's the blog banner at the top of this post.
--Disinvite Mozilo , by the way, reports that U.S. Rep. Henry Waxman has invited Mozilo to testify before Congress about his generous severance agreement. Writes Waxman, "I request that you be prepared to provide your perspective on this reported pay package. You should plan to address how it aligns with the interests of Countrywide's share | |
mortgage defaults mean more losses are on the way. The hemorrhaging, coupled with Freddie's equally grim earnings report Wednesday, are ratcheting up talk of a taxpayer, er, government bailout. 
