The views expressed here aren’t necessarily those of the ACFE, its executives, and employees. – ed.
“All tragedies in life are preceded by warnings.”
Arthur Levitt, former chairman of the Securities and Exchange Commission
In February 2003, Angelo R. Mozilo, an Italian butcher’s son and the well-tanned and impeccably dressed manifestation of the American dream, stood before an audience of academics and mortgage professionals in Washington, D.C., to describe his vision.
“Expanding the American dream of homeownership must continue to be our mission,” he said, “not solely for the purpose of benefiting corporate America, but more importantly, to make our country a better place.” As the chairman, chief executive officer, and president of Countrywide Financial Corporation, the mortgage banking behemoth he co-founded nearly 35 years before, Mozilo possessed both the power and vast resources to transform his gauzy message into hard-boiled business policy.
Mozilo, something of an evangelical capitalist, talked that day of home ownership as the social glue that “increases personal wealth … and increases social capital,” according to a Feb. 4, 2003 Countrywide news release. Home ownership, he said, “ties families, neighborhoods and communities together.” Children living in owned homes, he contended, have higher math and reading achievement levels and homeowners are more likely to join civic groups.
“Housing,” Mozilo concluded, “is critical to our nation’s welfare and to our communities’ well-being. Let’s make sure that the American dream of home ownership is never a cliché, and always our cause, and always our steadfast mission.”
Between 2005 and 2007, Countrywide did its part by originating $97.2 billion of subprime loans, more than any of its competitors. (See the May 6 article, “The Roots of the Financial Crisis: Who Is to Blame?” by John Dunbar and David Donald from The Center for Public Integrity’s series, “Who’s Behind the Financial Meltdown?”)
During the same period, Countrywide doubled the dollar value of its higher-risk nonprime and home equity loans to nearly 18 percent of the company’s total loan production and recorded nearly $11 billion of dubious profit, all of which would be reversed in 2008. In turn, Mozilo received compensation of nearly $392 million from 2003 through 2007. (See the special report, “CEO Compensation,” edited by Scott DeCarlo in the April 30, 2008 issue of Forbes magazine.)
Countrywide wasn’t the only lender that sold questionable loans with enormous fees that burdened hundreds of thousands of Americans with high-interest mortgages that many couldn’t afford, but it was clearly the largest and most ubiquitous. Countrywide helped thousands realize their dreams of home ownership, but for many the experience was short-lived and ended in financial disaster. For Mozilo, who dumped more than $400 million of his Countrywide shares, some at allegedly inflated values, this ill-fated experiment in home ownership removed the ambiguity of just whose mission he accomplished.