Angelo Mozilo, Visionary Behind Countrywide Financial, Passes Away at 84
By Patrick Oster | Bloomberg
Angelo Mozilo, the innovative mind behind Countrywide Financial Corp. and its rise to become the largest mortgage lender in the US during the housing boom, has sadly passed away at the age of 84. He died on July 16 due to natural causes, his son Mark confirmed.
The housing bubble and subsequent 2008 financial crisis, which led to the loss of nearly $8 trillion in stock market value and a severe recession, was fueled by easy and accessible credit for homebuyers, along with creative debt repayment options. Countrywide was at the forefront of this industry, and although it may not have been entirely fair, Mozilo became a public figure associated with the crisis. Time magazine even included him on their list of “25 People to Blame,” attributing Countrywide’s loose lending standards and unconventional mortgages as contributing factors.
Mozilo’s tenure as CEO abruptly ended in January 2008 when Countrywide, facing a lack of funds for loans, was sold to Bank of America Corp. for just $4 billion, a staggering one-sixth of its previous value. This sale would later be seen as a regrettable mistake by Bank of America, as they faced regulatory investigations and lawsuits related to Countrywide that would cost them over $50 billion.
In many ways, Mozilo’s role as a villain in this saga was unexpected. Throughout most of his career, he strongly believed in the importance of underwriting standards and lending responsibly to borrowers with the means to repay their loans. However, Countrywide began venturing into subprime lending in the late 1990s, following the trend set by other non-bank lenders. These lenders began relaxing their borrowing requirements, encouraged by the government, and offered mortgages to individuals who would have been turned away previously. Despite the higher risk associated with these borrowers, their willingness to accept higher interest rates made their mortgages attractive to Wall Street, where they were bundled and sold as mortgage-backed securities.
Relaxing Standards
After his partner David Loeb left the company in 2000, Mozilo fully embraced the looser practices of the surging subprime mortgage industry. These mortgages, with their higher interest rates, were in high demand on Wall Street. By participating in this market, Mozilo believed that Countrywide could maintain its top position, even though it came at the cost of deviating from their previously conservative loan verification methods.
The strategy paid off for a while, with Countrywide surpassing Wells Fargo to become the leading mortgage originator in the US by market share in 2004. The company experienced immense success, making $2 billion in new loans every average working day in 2006. Shareholders celebrated, with Countrywide boasting a five-year total return of 340%, nearly 10 times higher than the S&P 500.
Mozilo himself reaped the rewards of this success, earning $48 million in 2006 alone, surpassing top executives at JPMorgan Chase and Bank of America. From 2000 to 2008, his total compensation amounted to a staggering $521.5 million.
Reflecting on those prosperous years, Mozilo acknowledged that Countrywide and the housing market had become caught up in a “gold rush” mentality. The rapid rise in housing prices and the prospect of making easy money by flipping homes became the new norm, transforming the American dream of homeownership into a speculative commodity.
However, as housing prices began to decline in 2006, a wave of bankruptcies and losses hit the subprime lending industry. This quickly spread to hedge funds, commercial banks, and investment banks that had invested in these risky loans. In 2007, Bank of America injected $2 billion into Countrywide to keep it afloat, but the company folded just one month into 2008.
A Complicated Legacy
In a 2010 interview with the Financial Crisis Inquiry Commission, Mozilo expressed pride in Countrywide’s record of helping 25 million people, including minorities who faced historical discrimination in the housing market, achieve homeownership.
Angelo Robert Mozilo was born in the Bronx in December 1938 to Italian immigrant parents. His father worked as a butcher, and Mozilo took on part-time jobs to help pay for his education. After graduating from Fordham University in 1960, he began working full-time for a mortgage-servicing company and later merged with David Loeb’s firm to form Countrywide Credit Industries in 1969.
The timing was perfect, as the mortgage market was about to experience significant growth. In 1970, the government authorized Fannie Mae to purchase conventional mortgages, not just FHA or VA loans. By 1992, Countrywide had become the largest originator of single-family mortgages and a leading player in refinancings.
Legal Troubles and Controversies
During his time at Countrywide, Mozilo sold off a significant portion of his stake in the company while encouraging shareholders to remain invested. These sales led to a lawsuit by the Securities and Exchange Commission (SEC) in 2009, which accused him of insider trading and fraud related to the sale of substandard mortgages. Mozilo settled the suit by agreeing to repay $45 million in profits and paying $22.5 million in civil penalties, although he did not admit any wrongdoing. As part of the settlement, he faced a lifetime ban from serving as an officer or director of any public company.
The SEC settlement marked the largest ever paid by an individual or executive linked to the housing collapse. Additionally, federal prosecutors investigated Mozilo for criminal fraud but ultimately dropped the case in 2011. The Department of Justice also failed to build a civil case against him.
Following the legal battles, Mozilo remained relatively low-key, writing an unpublished autobiography and denying any responsibility for the market collapse.
Mozilo is survived by his wife Phyllis and their five children. His son Eric also held a senior role at Countrywide.
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