Thursday, October 18, 2007

Criminality At Countywide

The Securities Exchange Commission is investigating Angelo Mozilo CEO of Countrywide Financial, which is the largest US mortgage company. Mortgage Daily News Reports:


Countrywide is the largest mortgage company in the country and Mozilo, its founder, is generally credited or blamed for the company's evolution from a mostly conventional lender into one where subprime products dominated.

At issue is the sale by Mozilo of some 130 million of his company's stock in the first six months of 2007. It seems that there is a rather large loophole... ahem, provision, in the rules against insider trading that allows an insider to set up what is called a 10b51 trading plan. Such a plan, once established, allows the insider to proceed with transactions such as buying, selling, or exercising options even if he or she subsequently comes into possession of information that might impact stock prices which is not available to the public

There are other shady companies and characters out which need to be investigated.

The SEC is apparently investigating a dozen or so companies, including Countrywide, in connection with the subprime mess but, according to The Wall Street Journal article it is taking a special if informal look at Mozilo.
Fraud was a significant contributing factor in the explosion in prices for housing units. How large is yet to be determined? There is no question that many of the loans that had no documentation (aka liar loans) were fraudulent. Additionally, the subprime industry was infested with shady doings, being that many of its borrowers were encouraged to borrower more then they could reasonably afford.

Hopefully, the SEC and other investigating authorities will take a very tough look at Countrywide and other players in the mortgage mania.

11 comments:

  1. Mozilo last seen at Orange County airport fueling up his jet.....

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  2. I love how he came on CNBC and stated how strong his company is and not in trouble after BofA gave all that cash then turns around and sells all that stock..what a way to pump up the stock before dumping...can someone say Enron? But better, I love his response...that he is just diversifying his portfolio...yeah right.meaning, my company is going down and need to get what I can out of it...

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  3. of course Lance and VA Investor know better:

    Washington Mutual CEO sees no end to housing slump by Reuters - 10/18/07 snip:

    Chief Executive Kerry Killinger said on Wednesday he sees no end to the U.S. housing slump and that the largest U.S. savings and loan expects nonperforming assets and charge-offs to increase in the fourth quarter. "We were going through an orderly correction in the housing market until the middle of the year, when there was a significant falloff," Killinger said in an interview. "That has continued in the fourth quarter, accelerated by the lack of liquidity in the capital markets. "We are not making projections as to when the market will stabilize," he added. "At this point, we have not seen signs of stabilization." Killinger expects the thrift to set aside larger amounts for bad loans than amounts it writes off for the foreseeable future. Earlier Wednesday, Seattle-based Washington Mutual reported a 72 percent decline in third-quarter profit...

    It must be tough to be Lance.

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  4. Great investment opportunity in Costa Rica, beach condominiums, beach condos. Jaco apartment.
    Visit us for more information at www.jaco-bay.com

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  5. Anyone heard a rumor about Countrywide on Friday? Without giving away the rumor I'm trying to confirm, it has to do with certain tricks they are doing due to cashflow issues.

    http://www.marketwatch.com/tools/quotes/financials.asp?symb=CFC&sid=1426&report=3&freq=2

    Great investment opportunity in Costa Rica, beach condominiums, beach condos. Jaco apartment.

    Oh groan... A very good friend of mine just pulled a few hundred grand out of their investment property to buy a home in Costa Rico. They refused to drop the price of the home to market and instead will rent the investment property negative cash flow (prior to the equity extraction, it was a positive cash flow investment. They lost their renter while trying to sell).

    Thanks to the easy credit situation I know personally a half dozen families who will loose four to six homes (per family)! Thankfully, I only consider one a friend. ;)

    Got popcorn?
    Neil

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  6. Neil said:
    "Thanks to the easy credit situation I know personally a half dozen families who will loose four to six homes (per family)!"

    hmmm ... So why would a family need more than one home to live in? Do they have a long commute and need one in the 'burbs for the weekend and another in the city for work? But wait .. that can't be ... that still leaves two to 4 homes to account for! Neil, thank you for helping illustrate my point that BHs aren't wannabe homeowners but instead wanna flippers.

    And incidentally, I bet all six of your flipper friends have by now noticed your glee at their misfortune. Envy is really not a pretty emotion. Karma will ensure it comes back to haunt you.

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  7. "hmmm ... So why would a family need more than one home to live in? Do they have a long commute and need one in the 'burbs for the weekend and another in the city for work? But wait .. that can't be ... that still leaves two to 4 homes to account for!"

    Says the guy who subdivided his house into three apartments so he could rent two of them out...

    Pot, Kettle, lance

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  8. "Envy is really not a pretty emotion. Karma will ensure it comes back to haunt you."

    Arrogance isn't a pretty emotion either, nor is belittleing others for not buying a house. It seems karma has its work cut out for it in the future.

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  9. Lance said:
    So why would a family need more than one home to live in? Do they have a long commute and need one in the 'burbs for the weekend and another in the city for work? But wait .. that can't be ... that still leaves two to 4 homes to account for!

    Yes flippers!

    LANCE, don't even go to where you accuse us of wanting to flip. You know better than that. But the number of "stuck flippers" I'm finding in my day to day interactions is amazing.

    Nothing wrong with investing in real estate, but that isn't flipping. Investors actually know how to get a return even if the market turns south.

    Got popcorn?
    Neil

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  10. Neil said:
    "Investors actually know how to get a return even if the market turns south."

    Very true ... However BHs are wannabe flippers because they don't know how to get a return even when it is heading north. And the problem is that they really shouldn't even be looking at getting a return ... at least not a financial one.

    They think buying a home is a way to financial wealth and don't understand that it is a way of minimizing a necessary expense (i.e., housing.) They saw the flippers out there "making money" and got jealous ... and in so doing lost focus of their goal ... i.e., having a home ... period.

    If they hadn't lost sight of their initial goal, they would have found that under any circumstance (i.e., in any real estate market) it really is possible to buy a home to live in that will both satisfy your needs and not break you at the bank. I did it by buying a house with a rental unit in it. There are many other means out there to minimize your monthly housing expense. But when you view buying your home as a way of "making money", you start missing the ways of minimizing the expense. You just start getting jealous of the flippers that succeeded and end up becoming a wannabe flipper rather than a wannabe homeowner.

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  11. What the hell does the SEC have to do with the problems you have with the real estate market?

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