Category: Angelo Mozilo

Mozilo goes from housing hero to SEC probe

As MSNBC reported, Countrywide Financial’s not exactly press-shy CEO Angelo Mozilo is under investigation by the SEC for allegedly abusing a trading rule that allows executives to buy and sell their own stock without violating insider trading laws:

Mozilo sold some $130 million in Countrywide stock in the first half of the year through a prearranged 10b5-1 trading plan. The plans, popular among corporate executives, allow a company insider to set up a program in advance for such transactions and proceed with them even if he or she comes into possession of significant nonpublic information.

“We are making sure that a rule designed to help executives with a legitimate purpose is not being used for illegitimate purposes,” Linda Thomsen, the SEC’s enforcement director, said.

The action was encouraged by North Carolina state Treasurer Richard Moore, a slick politician with presidential hair who loves to be in front of a camera:

North Carolina state Treasurer Richard Moore last week asked the agency to investigate Mozilo’s stock sales. Moore raised questions about changes made to Mozilo’s plan in the months before the company’s stock plunged, allowing Mozilo to significantly increase his sales of Countrywide shares.

Moore, the trustee of a pension fund that holds about 500,000 shares of Countrywide stock worth some $8.6 million, said in a letter to SEC Chairman Christopher Cox that he was “shocked” to learn Mozilo “apparently manipulated his trading plans to cash in” as the crisis involving high-risk mortgages was heating up.

“As one of many investors who have felt the painful losses in Countrywide stock, I am outraged at his manipulation of the system and this abuse of shareholders,” wrote Moore, a Democrat who is running for governor. “The timing of these sales and the changes to the trading plans raise serious questions about whether this is mere coincidence.”

Not only does Moore try to deflect blame for owning Mozilo’s brown smelly bag, he fashions himself and the SEC as the white knights riding to the rescue of the investor class:

Word of the SEC’s inquiry “is good news for investors and sends a clear message that the questions raised are serious,” Moore said in an e-mailed statement Wednesday.

My comments:

  1. Mozilo didn’t just slip off the Titanic this year. He’s sold over $400 million of his own stock over the past several years – all disclosed. Shame on Moore and the people running the NC pension fund for falling asleep at the switch.
  2. When Mozilo was a poster-child for “expanding homeownership, ” the political class and the financial media loved him. Now that his stock has been more than cut in half and the country’s largest mortgage lender is looking more like another Enron, the finger pointing is beginning.
  3. The entire political class is obviously guilty here: the Greenspan Fed for fomenting a housing bubble for the ages, the ill-conceived public policy of expanding “homeownership,” politicians running public pension money, and SEC bureaucrats claiming they can protect investors.

Homeowner preservation assistance

We’re the government and we’re here to help! So says the state of Pennsylvania who created a mortgage refinance product deemed REAL, Refinance to an Affordable Loan. The program has been adopted by 67 lenders including Countrywide Financial Corp., Sovereign Bank, GMAC Financial Services and JPMorgan Chase. Borrowers generally must not make more than $120,000, among other conditions. The state will lend up to 100 percent of the mortgage.

Joining the forbearance party was none other than Angelo Mozilo and his ARM’s dealers at Countrywide. According to the Countrywide announcement over 35,000 “homeowners” have received assistance by contacting the mortgage retention center.

In addition to direct outreach, Countrywide’s efforts include working with non-profit and community groups across the country to create grassroots efforts to contact and counsel distressed borrowers, particularly in communities that are experiencing unusually high foreclosures. “There is an unprecedented effort among lenders, investors, community groups and the industry to work together to help homeowners,” said Bailey. “No one benefits from foreclosure, and counseling and intermediary support from these groups can be fundamental to the success of our borrowers.

Of course this press release by Moodys may have something to do with the press releases above:

Lenders did little to help subprime borrowers with adjustable-rate mortgages stay in their homes, even as it became clear many homeowners would struggle to keep up with their payments, a study released on Friday shows.
Moody’s Investors Service said banks eased borrowing terms on just 1 percent of subprime mortgages with interest rates that reset higher in January, April and July. It said that “only recently” have servicers begun to modify more loans to help homeowners avoid foreclosures, “despite much industry dialogue and heavy press attention” on the problem.

My comments: We’ve seen this movie before. During the 1930s numerous state and local governments intervened with forbearance programs which inevitably failed for obvious reasons. This grand experiment will also fail as wages continue to decline, adjusted for inflation while the financial obligations ratio hits an all time high.

Mr. Mozilo goes to Washington

Yesterday some of the country’s largest mortgage lenders went hat in hand to DC to chat with Treasury Secretary Hank Paulson. The parade was made up of Countrywide CEO Angelo Mozilo and high level execs from Wells Fargo, Citi Mortgage, JP Morgan Chase, and HSBC. As CNBC’s Diane Olick blogged, there was some turf defending and finger pointing amid the “let’s do what’s right” love-fest…

Hank Paulson:

Unlike periods of financial turbulence I’ve witnessed over many years, this turbulence wasn’t precipitated by problems in the real economy. This came about as a result of some bad lending practices

Angelo Mozilo:

Real estate values have clearly caused most of the problem.

After the meeting, Mozilo did what he does best – shmooze with the press. We parsed the interview and offer our own interpretation…

I don’t think there’s anybody doing more than Countrywide in terms of trying to help these people stay in their homes where that’s possible. So we just continue to work as diligently as we can to make certain every step is taken to preserve the integrity of homeownership. And we’ll continue doing that, and working with the government and any agency we can to make sure that we continue to do the right thing, and we get as much help as we can from the agencies – from Fannie, from Freddie, from FHA… I think everybody wants to do the right thing, and everybody’s on the same page.

Translation: We all just want to save our bacon, even if it comes at taxpayer expense. Bringing the American dream to the less fortunate is the best way to cover our scam. Reporters, especially, fall for this all the time.

Countrywide’s doing fine. And we’re gonna continue to grow…

Translation: We’re in deep doo doo.

It’s always been a prejudicial problem. You know, it’s a risk-based process that we have in this country. But my concern really is that with constraints now being placed on lending, particularly subprime, is the gap is going to widen dramatically between the have and have-nots. That’s my deep concern.

Translation: I have no problem playing the class envy card. Most are too ignorant of economics to realize there’s no free lunch when it comes to buying a home.

In terms of increasing the Fannie/Freddie limits, increasing the FHA loan amounts, getting the cap off Fannie and Freddie… I’m for that because we need liquidity in the marketplace… And the government has to play that role right now, in creating liquidity, so I’m in support of it.

Translation: We have a $209 billion “distressed” loan portfolio against a mere $14 billion in equity and would love to have the GSEs take some of it off our hands.

I think when you have increasing values as we had – tremendous values similar to the tech boom – everybody wanted to own a piece of real estate to get into the game. And so the rapid increase in values was the problem, and with that came some lending practices that certainly, in retrospect, were not acceptable. And now you have those values receding and… now all the sins of the past are being exposed as a result of receding real estate values. We’ve got to get real estate values at least stabilized in order to keep these people in homes so they can finance themselves out of the problems that they have.

Translation: I’m tossing you a crumb of truth here, so listen up. After the Fed dropped interest rates through the floor earlier this decade, they inadvertently ignited a housing boom. Everyone and his brother thought real estate always went up and we simply let them place that bet on massive margin. Our bad. I’d love to tap the leveraged speculator on the shoulder and get him to bring his equity up, but it’s too late for that – you can’t get blood from a turnip. So now we’re left holding the bag and our lenders are tapping us on the shoulder. We’re basically screwed, and the only thing that can save us is a new bull market in real estate.

Today, Countrywide issued a press release that admitted mortgage loan fundings for August dropped 17% from a year earlier. David Sambol, President and Chief Operating Officer, was stoic and reassuring:

Looking forward, the Company expects that it will be a long-term beneficiary of the current conditions and corrections in the mortgage industry, and we are confident that the actions which we have taken in response to the current environment will position us for profitable future growth and success.

My comment: How does anyone in his right mind believe any of the spin coming out of Countrywide these days?

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