Countrywide Financial: Angelo Mozilo, Friends of Angelo and the 2007 Run

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Countrywide Financial was founded in 1969 by David S. Loeb and Angelo Mozilo and listed on the New York Stock Exchange in 1985. Over two decades its stock returned 23,000 percent, and by 2006 it financed 20 percent of all U.S. mortgages, worth about 3.5 percent of U.S. GDP. It originated loans, packaged and traded mortgage-backed securities through its own capital markets arm, ran Countrywide Bank, the third largest savings and loan, and sold insurance through Balboa Life and Casualty. It spun off IndyMac in 1997. By 2006, 45 percent of its mortgages were nonconforming, and its underwriting allowed loans to families with as little as $1,000 a month left after payments. Its VIP program, Friends of Angelo, gave below-market mortgages to Senators Chris Dodd and Kent Conrad and Fannie Mae executives James Johnson and Franklin Raines.

In the first week of August 2007 the secondary market for nonconforming loans froze, Countrywide warned the SEC its financial condition was threatened, and by August 10 depositors were lining up in a run on Countrywide Bank. It drew down an $11.5 billion credit line from 40 banks, and regulators bent rules so Bank of America could inject $2 billion. In early 2008 Bank of America agreed to buy the company in stock for $2.5 billion, against a market value of $24 billion a year earlier, after 60 analysts spent four weeks on its books. Bank of America reached a nearly $17 billion settlement in 2014 and agreed to modify $8.4 billion in loans after state suits. Mozilo, who sold $291.5 million in stock from 2005 to 2007, was charged by the SEC with insider trading and securities fraud.

• Countrywide paid $30 million in 2003 to settle a class action over denied overtime for employees working 60 to 75 hours a week.
• Customers hit by Hurricanes Katrina, Rita and Gustav said deferred payments were later demanded in one lump sum within 30 days.
• New York attorney general Eliot Spitzer secured a settlement over steering Black and Hispanic borrowers into high-cost loans.
• Its Protect Our House campaign reportedly had staff sign loyalty oaths and wear green rubber wristbands.
• Countrywide ran a UK loan processing joint venture with Barclays and offshore tech support in India.