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What Was Angelo Mozilo Thinking?


The SEC complaint against former Countrywide chief Angelo Mozilo has some pretty damning stuff in it. Throughout the 53 page complaint, Mozilo can be seen complaining about the increasingly risky mortgages his company was making. In several cases he would ask that standards be raised and the riskiest product be discontinued.

According to the government, Countrywide adopted a “matching” strategy where it would not lose business to other more aggressive lenders. Countrywide used to refer loans that didn’t qualify under its guidelines to other lenders. Instead, when the company’s automated underwriting software spit out a loan that didn’t fit, Countrywide staffers refered the file to an “exceptions” department which figured out a way to underwrite the loan anyway.

“We’ve ceded our risk standards to whoever has the most liberal guidelines,” John McMurray, the company’s chief risk officer, said. But still the machine kept churning.

Mozilo recognized the risk of the company’s Pay Option Arms, ordering first that the risks be printed in bold letters on loan documents so customers couldn’t miss them. Then he ordered the company to sell all its Pay Option loans.

Knowing all this, why did Mozilo keep selling his Countrywide stock, setting himself up for an insider trading case like this? Maybe the thought his regular stock sale plan would cover him. Maybe he thought he could figure a way out of the company’s troubles before things got really ugly. A lot of questions, that he may have to answer in court.


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