Mozilo was telling the world that everything was fine, Mozilo was actually selling his own Countrywide
stock—over $100 million in the year before the firm collapsed. His total compensation during the bubble was more than $450 million, and as a result of his stock sales over the years he
remains extremely wealthy, with a net worth estimated at $600 million.
When collapse could no longer be postponed, Countrywide solditself to Bank of America; the deal was signed in January 2008 and finally completed in July. The acquisition
was to prove a very costly mistake for Bank of America, causing many billions of dollars in further losses. By 2012 Countrywide’s losses and legal liabilities were so severe as to threaten
Bank of America’s continued viability.
In July 2008, when Bank of America officially took over Countrywide, Eileen Foster was offered the position of Senior Vice President, Mortgage Fraud Investigations Division Executive, which she
accepted. However, the Employee Relations organization continued to investigate Foster and question her colleagues, one of whom warned Bank of America executives, including its general counsel and
its chief operating officer. On 8 September 2008, Eileen Foster was told by senior Bank of America executives that she had been terminated. She filed a whistle-blower lawsuit, which she won; OSHA
ordered her reinstatement and awarded her damages of over $900,000. In her interview with 60 Minutes , Foster stated that the immediate cause of her firing was that she refused to be coached
appropriately about what to say to government regulators. She also stated on camera that as of the time of the interview in 2011, she had never been interviewed by any US law enforcement
official.
Other Subprime Lenders
While WaMu, New Century, and Countrywide were among the largest subprime lenders, there were many others just as bad. Fremont, for example, was one the country’s largest,
and sold its loans to the top banks in securitization—Goldman Sachs, Merrill Lynch, Bear Stearns, Deutsche Bank, Credit Suisse, Lehman Brothers, Morgan Stanley. That is, it did so until March
2007, when the FDIC forced it out of business, and into bankruptcy, for multiple violations of law and regulations. In 2008 the Massachusetts Supreme Court, on an action brought by the state
attorney general, affirmed a prohibition on foreclosures of many Fremont mortgages, on the ground that they had been designed to be predatory. 27
In lawsuits, a long list of confidential witnesses drawn from former employees recited the usual frauds. Allegedly, underwriters were instructed “to think outside the
box”, and “make it work”. 28 If borrowers’ actual incomes were not sufficient to support a mortgage, loans were converted to
stated income loans at whatever level was necessary. A series of forty loans was allegedly accepted from one broker even though all of them had identical bank statements.
WMC was yet another. It was the sixth-largest subprime originator in the country in 2004, when it was sold to GE Capital (yes, General Electric) by its owner, the private equity investment firm
Apollo Management, whose CEO, Leon Black, spent $1 million to have Elton John play at his birthday party. For several years GE made lots of money, but it shut the company down in September 2007,
swallowing a $400 million charge.
WMC’s lineup of Wall Street securitizers was much like Fremont’s—the largest and most prestigious firms on Wall Street. Yet WMC was fourth on the Comptroller of the
Currency’s 2010 “Worst Ten in the Worst Ten” list—the ten worst lenders in the ten most decimated housing markets in the US. A postmortem conducted as part of a civil fraud
suit by PMI, Inc., a mortgage insurer like MBIA, found the usual story—widespread breaches of securitization warranties, missing or obviously falsified documentation, and so
forth. 29
Ameriquest was yet another, and the US leader in subprime lending in 2003,
stock—over $100 million in the year before the firm collapsed. His total compensation during the bubble was more than $450 million, and as a result of his stock sales over the years he
remains extremely wealthy, with a net worth estimated at $600 million.
When collapse could no longer be postponed, Countrywide solditself to Bank of America; the deal was signed in January 2008 and finally completed in July. The acquisition
was to prove a very costly mistake for Bank of America, causing many billions of dollars in further losses. By 2012 Countrywide’s losses and legal liabilities were so severe as to threaten
Bank of America’s continued viability.
In July 2008, when Bank of America officially took over Countrywide, Eileen Foster was offered the position of Senior Vice President, Mortgage Fraud Investigations Division Executive, which she
accepted. However, the Employee Relations organization continued to investigate Foster and question her colleagues, one of whom warned Bank of America executives, including its general counsel and
its chief operating officer. On 8 September 2008, Eileen Foster was told by senior Bank of America executives that she had been terminated. She filed a whistle-blower lawsuit, which she won; OSHA
ordered her reinstatement and awarded her damages of over $900,000. In her interview with 60 Minutes , Foster stated that the immediate cause of her firing was that she refused to be coached
appropriately about what to say to government regulators. She also stated on camera that as of the time of the interview in 2011, she had never been interviewed by any US law enforcement
official.
Other Subprime Lenders
While WaMu, New Century, and Countrywide were among the largest subprime lenders, there were many others just as bad. Fremont, for example, was one the country’s largest,
and sold its loans to the top banks in securitization—Goldman Sachs, Merrill Lynch, Bear Stearns, Deutsche Bank, Credit Suisse, Lehman Brothers, Morgan Stanley. That is, it did so until March
2007, when the FDIC forced it out of business, and into bankruptcy, for multiple violations of law and regulations. In 2008 the Massachusetts Supreme Court, on an action brought by the state
attorney general, affirmed a prohibition on foreclosures of many Fremont mortgages, on the ground that they had been designed to be predatory. 27
In lawsuits, a long list of confidential witnesses drawn from former employees recited the usual frauds. Allegedly, underwriters were instructed “to think outside the
box”, and “make it work”. 28 If borrowers’ actual incomes were not sufficient to support a mortgage, loans were converted to
stated income loans at whatever level was necessary. A series of forty loans was allegedly accepted from one broker even though all of them had identical bank statements.
WMC was yet another. It was the sixth-largest subprime originator in the country in 2004, when it was sold to GE Capital (yes, General Electric) by its owner, the private equity investment firm
Apollo Management, whose CEO, Leon Black, spent $1 million to have Elton John play at his birthday party. For several years GE made lots of money, but it shut the company down in September 2007,
swallowing a $400 million charge.
WMC’s lineup of Wall Street securitizers was much like Fremont’s—the largest and most prestigious firms on Wall Street. Yet WMC was fourth on the Comptroller of the
Currency’s 2010 “Worst Ten in the Worst Ten” list—the ten worst lenders in the ten most decimated housing markets in the US. A postmortem conducted as part of a civil fraud
suit by PMI, Inc., a mortgage insurer like MBIA, found the usual story—widespread breaches of securitization warranties, missing or obviously falsified documentation, and so
forth. 29
Ameriquest was yet another, and the US leader in subprime lending in 2003,
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