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Mozilo Speaks up for Countrywide in MBIA Lawsuit: "We were a world-class company…"

by devteam December 13th, 2012 | Share

Even after paying a $67 millionrnsettlement to the SEC and being banned from the mortgage industry AngelornMozilo, founder and former president of Countrywide Financial Corp still saysrnhis company never made a loan “that we knew the borrower could not pay.”  Mozilo defended Countrywide in a depositionrnmade last year in connection with a law suit by MBIA, Inc against Bank ofrnAmerica (BoA) which bought Countrywide in 2008. rnThe deposition was filed in the New York Supreme Court earlier thisrnweek.</p

The MBIA lawsuit is one of manyrnbrought against Bank of America since it acquired Countrywide.  It is estimated that the bank has so farrnspent more than $40 billion trying to clean up defective mortgages and improperrnforeclosures caused by the mortgage company’s lax lending standards. </p

But according to an article in Bloomberg, Mozilo said that he had nornregrets about how he had run his firm, and denied that Countrywide had causedrnthe housing crisis.  “This is all aboutrnan unprecedented, cataclysmic situation, unprecedented in the history of thisrncountry. Values in this country dropped by 50 percent,” he said.  </p

Mozilo contends he only agreed tornthe $67.5 million regulatory settlement in 2010 to protect his family. “It hadrnnothing to do with anything that I did at Countrywide or anything I did in myrnpersonal life.”  Relatives “were beingrnharassed in school. My name was in the paper every day nationally andrninternationally, accusing me of things that were absolutely untrue. I could notrnhave my family go through it anymore, and that’s why I settled.” </p

MBIA’s suit in the New York StaternSupreme Court is seeking judgments against BoA for home loans written byrnCountrywide between 2004 and 2007 which were later packaged into securities.  MBIA guaranteed payments to investors whornpurchased the securities which the bond insurer maintains were riskier than promised.  The suit claims that more than 56 percent ofrnsome 200,000 loans were materially defective; an amount plaintiff’s attorneysrnequate to $12.7 billion.</p

Bloomberg</iquotes PhilippernSelendy, an attorney with Quinn Emanuel Urquhart & Sullivan which representsrnMBIA, as saying that the risk should never have been passed to the insurer;  "The loans should have never been in there.rnThe probability of default is exceptionally high.”   He said the loan files were missing key documentsrnand cited examples of loans where borrowers had substantially misrepresentedrntheir income.</p

Anotherrnspokesperson for MBIA told Bloomberg</ithat the company has already paid more than $3 billion in claims to investorsrnand that its claims against BoA total more than $4.5 billion.  The firm is seeking $3 billion in damages andrnrepurchase by BoA of more than $12 billion in loans.</p

The bank’s Countrywide division maintains that MBIA insured thernsecuritizations even though they knew the lender’s loans were becoming riskierrnand did not do proper due diligence before doing so.  “Rather than accepting responsibility for therninsurance policies it wrote, MBIA seeks to walk away from its contracts,” arnspokesperson for Countrywide said. </p

Mozilo, in his deposition, continues his long standing defense of his formerrncompany.  “I have no regrets about how Countrywidernwas run,” Mozilo said. “We were a world-class company in every respect.” </p

 “We never made a loan knowingly — and itrnwould be stupid to do so — that we knew the borrower could not pay. Never,”rnMozilo said. “All our loans had that one standard from 1968 to the end of myrnrein at Countrywide.” </p

His record $67.5 million payment settledrnan SEC claim that he had known about the deteriorating quality of loans made byrnCountrywide but continued to mislead investors even while his internalrncommunications described some products as toxic.  He was accused also of insider trading,rnaccelerating his stock sales to make a reported $140 million.  He admitted no wrongdoing in resolving thernaccusations.   

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About the Author

devteam

Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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