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Suits and Severance at Countrywide
The Fed initiates another whopping rate cut. Too late to save Countrywide, whose deal to be acquired by Bank of America still looks like a go. The nation?s largest mortgage lender released its year end numbers on Jan. 29. The company didn?t hold a conference call to discuss them. No need, they?re gone. The big startling number: 33% of Countrywide?s subprime portfolio is delinquent. That compares with only 5% of their conventional mortgages. Imagine, one out every three of your loans going bad. Are people not paying because they think Countrywide will modify the loans and bail them out? A lawsuit filed against Countrywide on Jan. 17 by Mark Zachary, a former regional manager for the company, sheds some light on how that 33% figure may have come to be. Zachary claims that when Countrywide?s risk management group determined a customer didn?t have the income necessary to qualify for a conventional loan, other managers at the company quickly steered the customer to the subprime group. There, Zachary alleges, the customers were offered loans where they didn?t have to prove they had the income required. Zachary says ?loans officers would then coach the applicant as to what income level was needed to qualify when it was sent to the subprime originators in Plano, Texas.? Countrywide earned more money selling subprime loans. Of course, the customers had to pay higher rates. Zachary claims he complained about these practices to higher-ups, but only became a ?pariah? at the company. Think it?s a coincidence Countywide CEO Angelo Mozillo agreed to give up his $37 million severance package and free trips on the company plane this week?