Countrywide Home Loan Devastation Lingers as Ex-Chief Moves On

Angelo Mozilo may now move forward with his life.

Mr. Mozilo, the former CEO of Countrywide Financial, formerly the nation’s largest subprime mortgage lender, was advised by the Justice Department earlier this month that he was no longer under investigation for civil mortgage fraud. Mr. Mozilo is now free after the government discontinued its criminal investigation into his participation in the financial crisis.

That is, at least, the perspective from Washington. Mr. Mozilo is nonetheless remembered as a prominent character in the mortgage crisis on Main Street, where the pain of Countrywide’s irresponsible lending and harsh foreclosure methods still reverberates.

Countrywide, a freewheeling mortgage machine based in Southern California and co-founded by Mr. Mozilo was at the crux of the mortgage catastrophe that brought the country’s economy to its knees in 2008. Mr. Mozilo, perpetually tanned and enamored of showy outfits, embodied the home-lending good times that eventually went wrong. The government’s decision to close the case against Mr. Mozilo is a watershed moment, a chance to reflect on the company he co-founded.

Mr. Mozilo has claimed that neither he nor Countrywide did anything improper since the company went bankrupt in 2007 and was taken over by Bank of America in a fire sale. His business, which he co-founded in 1969 and made him quite wealthy, was simply caught in a Force 12 financial storm.

Is it possible that Countrywide played a part in causing the storm? In Mr. Mozilo’s opinion, no. His enterprise, on the other hand, made America a better place.

In a 2010 interview with federal investigators, he said, “Countrywide was one of the greatest enterprises in the history of our country and perhaps made more difference to society, to the integrity of our society, than any company in the history of America.” “And it’s from there that I get my energy.”

I reread and listened to several of the government investigators’ conversations with Mr. Mozilo after the financial crisis in the previous week. Mr. Mozilo insisted that his organization had high ethical standards during those meetings.

Mr. Mozilo, for example, criticized a situation in which Countrywide had to buy back defective mortgages it had sold to HSBC in an email to a colleague in April 2006.

He stated, “The loans were originated through our channels with blatant disdain for process, compliance with guidelines, and irresponsible behavior in fulfilling timetables.”

They weren’t the only ones, either. According to internal papers released by a former Countrywide employee, lending audits in six of the company’s main regions as early as September 2004 identified one out of every eight loans as “severely unacceptable” due to inadequate underwriting. That was before the housing bubble burst.

Mr. Mozilo undoubtedly succeeded in turning Countrywide into a profit machine, at least for a time. Countrywide was a vertically integrated mortgage engine, with an array of subsidiaries set to drain fees from every stage of the lending and loan servicing process, which contributed to the stock’s rise.

The government discovered that by providing in-house appraisals, property upkeep, insurance, and other services, Countrywide was able to mark up the costs of its services by more than 100%.

The Federal Trade Commission filed a complaint against the corporation in June 2010 based on these allegations. What is the agency’s decision? Almost half a million clients were overcharged by Countrywide.

According to the commission, the plan was designed to boost Countrywide’s earnings from default-related services during a downturn. In other words, if home loan origination earnings declined, Countrywide could compensate by putting more pressure on its most troublesome customers. One interesting fact from this lawsuit is that Countrywide charged some foreclosure homeowners $300 to trim their lawns.

In a 2011 interview after Countrywide settled the case, Jon Leibowitz, then chairman of the Federal Trade Commission, said, “It is remarkable that one single business could be liable for overcharging more than 450,000 homeowners, which is more than 1% of all mortgages in the United States.” Its economic model was “built on deception and corruption,” with “extremely vast and unprecedented harm committed to American customers.”

Donald F. Walton, the United States trustee for the Atlanta region at the time, sued Countrywide in early 2008 over a 2005 bankruptcy petition involving John Wayne and Robin April Atchley, homeowners in Waleska, Ga.

The Atchleys’ loan servicer, Countrywide, charged them illegal fees and claimed twice that they were overdue on their mortgage when they were not. Countrywide’s lawyers attempted to seize the Atchleys’ property but were forced to back down after the couple proved them wrong in court.

Mr. Walton said in a brief that “Countrywide’s inability to verify the veracity of its pleadings and statements in this matter is not a unique incident.” “Countrywide and its representatives have been sanctioned in the bankruptcy system in recent years for filing incorrect petitions and other similar abuses.”

A court in western Pennsylvania determined that the firm falsified bankruptcy filings for a borrower. The paperwork submitted to the court stated incorrectly that a borrower owed $4,700 in escrow charges.

Countrywide agreed to pay $325,000 to the Chapter 13 bankruptcy trustee in Pittsburgh in 2008, settling a case accusing the company of engaging in abusive activities in over 300 mortgage loans reviewed by the court.

Howard Rothbloom, a consumer bankruptcy lawyer in Marietta, Georgia, defended the Atchleys in their battle with Countrywide.

He was recently asked about Countrywide’s impact on his life in an interview. He saw a silver lining: the company’s tactics were exposed, which helped reform the bankruptcy system for consumers, he added.

“The Atchley case exposed the abuses and forced a reform in the system,” he stated. “The system now functions a little bit differently and is a little more equitable.”

That’s quite a feat.

Mr. Bailey said in an interview on Wednesday that he considers himself extremely fortunate since Bank of America worked out a deal with him to allow him to stay in his 900-square-foot bungalow. Regardless, he said it took the better part of seven years.

Mr. Bailey responded, “I got lucky.” “If I had been anyone else, I would have been evicted from my home and living on the streets. Because no one else got that email from Mozilo, I’m a part of the 0.0001%.”