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Angelo R. Mozilo, the co-founder of Countrywide Financial who cast himself as the leader of a revolution to expand access to mortgage lending only to become the public face of the 2007 subprime mortgage collapse, has died at age 84.
Mozilo, who agreed to a $67.5 million settlement with the SEC in 2010 but never faced criminal charges, died Sunday, according to an announcement issued by a charity founded by Mozilo and his late wife, Phyllis.
The charity, the Mozilo Family Foundation, held more than $20 million in investments at the end of 2021, the most recent year tax records are available, providing funding to private Catholic schools and other causes the family supported.
“It is with great sadness that the family of Angelo Robert Mozilo announces his passing from natural causes,” The Mozilo Family Foundation said in an announcement. “The family requests privacy at this time.”
Mozilo — who was named to Inman’s “10 Most Influential Real Estate People” list in 2005 for taking Countrywide Financial “from its humble beginnings in 1969 to a global leader in residential finance and related services today” — helped pioneer subprime lending, packaging loans that didn’t meet standards set by Fannie Mae and Freddie Mac into securities that were sold to investors around the world.
In January 2005, as easy access to mortgage credit was driving up home prices, Countrywide announced an expansion of its “We House America” initiative to fund $1 trillion in home loans to minorities and lower-income borrowers and communities through 2010.
“I am proud of our lending record and pleased to announce the expansion of our lending commitment,” Mozilo said at the time, claiming that the We House America program had already placed 2.4 million families into homes, a number that Mozilo said would nearly triple by 2010.
Subprime tsunami
But rising delinquencies and foreclosures on subprime loans led investors to stop funding the risky mortgages in 2007, leading to a collapse in home prices, a wave of foreclosures and trillions in losses that rippled through the global economy.
By the end of 2007, nearly 630,000 of the 9.03 million loans Countrywide was collecting payments on were delinquent and 94,000 were pending foreclosure. Countrywide lost $704 million in 2007, racking up more than $1.6 billion in losses in the last six months of the year that more than wiped out profits made in the first half of the year.
Although most of the loans Countrywide made during the housing boom were not to subprime borrowers, those loans defaulted at a higher rate than prime loans. By January 2008, Countrywide said that about 1 in 3 subprime loans in its $1.5 trillion servicing portfolio were delinquent by 30 days or more, compared with less than 1 in 10 for the portfolio as a whole.
Later that year, Countrywide found a savior in Bank of America, which had visions of becoming America’s largest mortgage lender by acquiring Mozilo’s struggling company. Although Bank of America was having second thoughts about the acquisition in the spring of 2008, it ultimately closed the deal.
Ultimately, the Countrywide acquisition reportedly cost Bank of America more than $50 billion, and it’s since been left in the home-lending dust by nonbank mortgage lenders, such as Rocket Mortgage and United Wholesale Mortgage.
Between 2007 and 2010, an estimated 3.8 million Americans lost their homes to foreclosure as falling home prices made it harder for struggling borrowers to pay off their debts by selling their houses. By the time home prices recovered in 2014, nearly 10 million homeowners are thought to have lost their homes to foreclosure.
Civil penalty but no criminal charges
As the crisis at Countrywide and other lenders unfolded, practices like a Countrywide program that provided mortgages on special terms to “Friends of Angelo” — including at least two U.S. senators and two former presidential cabinet members — came under scrutiny. Former California Treasurer Kathleen Brown and Bill Clinton’s Secretary of Housing, Henry Cisneros resigned their positions on Countrywide’s board.
The House Committee on Oversight and Government Reform published a report on Countrywide’s “Systematic and Successful Effort to Buy Influence and Block Reform.”
In 2010, the Securities and Exchange Commission announced that Mozilo had agreed to pay what was then a record $22.5 million penalty to settle allegations that he and two other former Countrywide executives misled investors as the subprime mortgage crisis unfolded.
Mozilo also agreed to pay $45 million in “disgorgement of ill-gotten gains,” for a total financial settlement of $67.5 million. But that money was earmarked for investors in Countrywide, not borrowers who lost their homes in foreclosure. And under the terms of Mozilo’s employment contract, Bank of America Corp. and Countrywide’s insurers reportedly paid most of the settlement.
The U.S. Department of Justice closed a criminal investigation of Mozilo in 2011 and in 2016 opted not to charge him and other Countrywide executives with defrauding investors in mortgage-backed securities, Reuters reported at the time.
Mozilo’s legacy
Mozilo never accepted the premise that the collapse of subprime lending was the root of the 2007-09 Great Recession and global financial crisis and in recent years strove to defend his reputation.
“If you take the totality of the subprime assets, the value of the subprime business that existed at the time … it was a puddle in an ocean,” Mozilo reportedly said at a 2019 conference in Las Vegas. “But it’s an easy target for the politicians and media to attack, to rile people up about. But it was not the cause at all.”
Real estate values became “very, very inflated … and a bubble was created, and it didn’t take much to penetrate that bubble,” CNBC reported Mozilo as saying at the conference.
In a 2009 New Yorker profile of Mozilo, Connie Bruck recounted Countrywide’s rapid growth at the turn of the century, after Mozilo took full control of the company after the retirement of his partner, co-founder David S. Loeb, who died in 2003.
“Wall Street’s white-shoe bankers had long looked down on Mozilo, the mortgage banker from Los Angeles, with his gold necklace, white-collared shirts, hand-tailored suits, and fancy cars,” Bruck wrote. “They disliked his swagger, and they didn’t invite him to join their private clubs. But by 2003 Wall Street had become addicted to home loans, which bankers used to create immensely lucrative mortgage-backed securities and, later, collateralized debt obligations, or C.D.O.s—and Countrywide was their biggest supplier. Suddenly, Mozilo seemed almost an insider.”
Mortgage industry veteran Rob Chrisman reminisced on his website Monday about Mozilo’s legacy and a discussion he had with him about “the early days and the adversity he faced in the 1960s and 1970s.”
“Up until that time, lending was concentrated in depository institutions, and through hustle and grit Angelo built his company and the industry around it, a fascinating story,” Chrisman wrote. “Say what you will about him, and the role of Countrywide in the financial crisis, he created a segment of the industry that helped hundreds of thousands of people earn a living, often handsomely, and support their families.”
But not everyone was so forgiving. When Mozilo spoke at the National Association of Mortgage Brokers’ annual convention in Las Vegas in 2018 — on a panel moderated by Chrisman — mortgage broker and Orange County Register columnist Jeff Lazerson was surprised that Mozilo was not asked about what he thought went wrong at Countrywide or his takeaways.
“For me, the Mozilo interview at the conference was somewhere between fantasyland and a farce,” Lazerson wrote at the time. “Chrisman lobbed up softball questions about Mozilo’s background and the rise of Countrywide. Nowhere was it mentioned that the mortgage company was seen by many as the ‘epicenter’ of the 2008 mortgage crisis, issuing millions in ‘liar loans’ homeowners couldn’t afford.”
Most attending the talk gave Mozilo a standing ovation, Lazerson reported.
Mozilo Family Foundation’s causes
Mozilo, whose net worth since Countrywide’s downfall has been estimated at between $300 million and $600 million, managed to sock away millions in a charitable organization run by family members.
The Mozilo Family Foundation reported $961,877 in net investment income on $22.2 million in assets in its most recent tax return, according to records compiled by ProPublica.
The foundation’s officers — President Christy Mozilo Larsen, Secretary David Kim Mozilo and board member Eric Ralph Mozilo — received no compensation, according to the tax filing. The foundation had no paid employees and operating and administrative expenses totaled $4,395.
Top recipients of the $1.038 million in contributions, gifts and grants made by the foundation in 2021, include Flintridge Sacred Heart Academy ($300,000), Catholic Gonzaga University ($280,900) and Verbum Dei High School ($110,000). Children’s Hospital Los Angeles, Loyola Marymount University and the University of San Diego each received $100,000 from the foundation in 2021.
Flintridge Sacred Heart Academy is a private, all-girls Catholic high school in the Roman Catholic Archdiocese of Los Angeles run by the Dominican Sisters of Mission San Jose.
Verbum Dei High School is a private Catholic all-boys college preparatory school in Los Angeles, which was renamed Verbum Dei Jesuit High School last year when it transitioned to a private Jesuit school within the Archdiocese of Los Angeles.
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