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.