Mozilo Says SEC Admits Stockholders Knew Countrywide Risks

August 4, 2010 No Comments »

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Countrywide Financial’s former CEO Angelo Mozilo said the SEC has now admitted that investors knew about the risks taken by the former top mortgage lender before its eventual collapse, according to a Bloomberg report.

In a federal court filing in Los Angeles, Mozilo asked U.S. District Judge John F. Walter to rule on the SEC’s fraud allegations without a trial based on “undisputed evidence” that shows there was no wrongdoing.

Apparently the SEC admitted that Countrywide’s depleted stock price was a reflection of greater risk taken on by the company.

Additionally, Countrywide provided information about the riskier loans in prospectus supplements for mortgage-backed securities sold on the secondary market, per the filing.

The SEC sued Mozilo back in June 2009 after he reassured investors publicly about the quality of Countrywide’s loans, while at the same time dumping roughly $140 million in company stock.

Mozilo wrote in an e-mail that the company was “flying blind” and had “no way” of determining the risk of certain adjustable-rate mortgages, according to the SEC complaint.

Interestingly, back in 2008 Mozilo pinned the blame on the housing market itself, and not so much on the high-risk products sold to borrowers as home prices skyrocketed.

He expressed strong support of toxic loan programs like the option arm while clearly noting that Countrywide was not their creator.

Mozilo also recommended that underwriting guidelines be relaxed to allow more homeowners facing negative equity to refinance (into fixed loans) more easily.

Sounds like he kinda knew what was going to happen…

Yesterday, Countrywide settled a shareholder lawsuit for a whopping $600 million.

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