History won’t be kind to Angelo Mozilo, the founder of Countrywide Financial whose shareholders approved the company’s sale to Bank of America yesterday. His is a great American success story, but a tragedy, too.
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On the same day as Mozilo’s last shareholder meeting, three states - California, Illinois and Washington - began what may begin a flood of legal actions against Countrywide and its lending practices.
California Attorney General Jerry Brown called Countrywide “a mass-production loan factory, producing ever-increasing streams of debt without regard for borrowers.” He said the nation’s largest mortgage lender “ripped off” Californians and “exploited the American dream of homeownership.”
At a news conference, Brown said: “The damage done by Countrywide is enormous. It ripples through Wall Street and Main Street.”
Mozilo is named personally in the lawsuit by California, where Countrywide is based.
Brown’s action is ironic. His sister, Kathleen Brown, former California state treasurer, was on the Countrywide board of directors from 2005-2007. She left the board as the industry’s troubles were becoming apparent, as did another high profile director, Henry Cisneros. Board members who were not employees of Countrywide were not named in the suit.
The son of a butcher, Mozilo helped create the modern mortgage industry. His rags to riches rise from humble beginnings earned him membership in the Horatio Alger Association.
But, many say, the 69-year-old was also a prime architect of the current mortgage mess. He has been vilified as the symbol of greedy corporate leaders. He made hundreds of millions of dollars at Countrywide and continued to sell company shares as the stock price plummeted.
More recently, he and Countrywide have been ridiculed for a so-called Friends of Angelo program, which gave VIP treatment and favorable mortgage rates to U.S. Senators and others.
At yesterday’s meeting, which lasted less than 20 minutes, Mozilo got a little teary eyed, according to Reuters and Business Week. He recalled how he founded the company nearly 40 years ago with a $75,000 loan from Bank of America.
“I’ve come full circle,” he said.
Mozilo said it was the “end of an era” for stand-alone mortgage lenders, such as Countrywide, but maintained that company employees should be proud that they’ve made the homeownership widely available. “Despite what has been written in the press, we are leaders in helping families avoid foreclosure,” he said.
The deal with Bank of America is expected to close by next week. When it was announced in January, the stock transaction was valued at $4 billion. It has since fallen to less than $3 billion.
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