As we continue to note 10 years anniversaries of key events in the financial crisis, the latest to note is the demise of Countrywide Mortgage. This article explains who big and powerful Countrywide became by selling subprime mortgages and packaging them for sale as securities. It also explains how the business fell apart and helped lead to the housing crisis and overall financial crisis.
In 2009, the SEC accused Mozilo of duping investors about how vulnerable Countrywide was to subprime mortgages — and then using inside information to dump $139 million of his own shares in 2006 and 2007 before they tanked.
While Mozilo was telling shareholders that Countrywide mostly lent to healthy borrowers, the SEC said, he was sounding the alarm inside the company with a “series of increasingly dire assessments” about the dangers ahead.
Specifically, Mozilo warned about the risks of 80/20 subprime loans, which allow borrowers with weak credit scores to buy a home without a down payment by taking out two loans, one for 80% of the value and a second for the remaining 20%.