In the United States, owning one’s home is at the core of the American Dream. Owning means investing for the long term and an end to rent payments. It also means painting a wall bright purple without needing to answer to anyone, except perhaps one’s spouse.

Unfortunately for millions of Americans in the past few years, home ownership has also meant doing business with Countrywide Financial Corporation.

Misleadingly wooed by Countrywide’s too-good-to-be-true financing schemes, thousands are now defaulting on their home mortgage loans. This mortgage meltdown has spurred what could become the largest home foreclosure crisis in U.S. history, leaving Countrywide’s shareholders and thousands of lower-income and minority customers holding the bag.  

Meanwhile, Countrywide executives raked in millions, having sheltered themselves from their corporation’s collapse.

Predatory lending and greed at the top
Countrywide Financial Corp. was founded in 1969 and is based in Calabasas, California. The nation's number one mortgage lender, Countrywide services about 17 percent of all mortgages in the U.S.[1]

SEC filings show that CEO Angelo R. Mozilo made a cool $13 million in a single month last summer as Countrywide's financial situation worsened.[2] Mozilo reaped about $150 million during 2007 by exercising his stock options and selling off his own Countrywide shares.[3]

The Center for Responsible Lending (CRL) has exhaustively catalogued Countrywide’s pillaging of its customers and shareholders. CRL reports the following abuses:

Predatory lending. Borrowers and regulators have accused the company of bait-and-switch sales tactics, fraud, racial discrimination, fee-gouging and elder abuse.

Dangerous products. Countrywide has been a leader in pushing unsound products, such as “exploding” subprime adjustable rate mortgages and “stated income” loans, as well as poorly underwritten “payment option” adjustable rate mortgages.

Conflicts of interest. Countrywide has created a corporate structure designed to allow its subsidiaries to work hand-in-hand in squeezing borrowers with excessive fees and penalties.

Broken promises on loan modifications. The company has a history of failing to fully live up to its promises to help borrowers keep their homes by modifying onerous loans.

Abusive loan servicing. Borrowers claim that Countrywide has engaged in sloppy and fraudulent loan servicing that has produced unwarranted fees and foreclosures.

Weak Corporate Governance. Countrywide’s high-wire growth strategy has backfired, divesting shareholders of billions of dollars in market value and leaving the company teetering on the brink of failure. Meanwhile, even as the company has stumbled, its board members have allowed Mozillo to reap unreasonable personal gains and have claimed excessive compensation for themselves.

Countrywide’s CEO made a cool $13 million in a single month at the peak of the corporation’s financial woes last summer.

Questionable borrowings. Countrywide’s growing reliance on capital from the Federal Home Loan Bank system puts the system in the position of bankrolling abusive loans and at risk of significant losses as more loans go bad.[4]

The Justice Department has other problems with Countrywide. The Wall Street Journal reports that the Department filed a complaint in late February 2008, asking courts to penalize Countrywide for its “sustained bad-faith conduct” in bankrupt proceedings with customers in Georgia, Ohio, and Florida. The Justice Department division wrote, “Countrywide’s failure to ensure the accuracy of its claims and pleading has resulted in an abuse of the bankruptcy process.”

On January 11, 2008, Bank of America announced it would buy Countrywide for $4 billion in an all-stock transaction, in a deal expected to close in the 3rd quarter of 2008.   It’s unclear whether or not this is good news for consumers. Senator Charles Schumer (NY) called on the Bank to reconsider its appointment of Countrywide’s David Sambol as the head of the two banks’ combined home mortgage business.[5]

Take action
The Center for Responsible Lending encourages citizens to support legislation that would prevent hundreds of thousands of Americans from losing their homes, as well as legislation that would protect consumers from irresponsible lending practices. http://www.responsiblelending.org/action/