Countrywide Financial Case Study 1

1. List the key details of the case. Started as Countrywide Credit Industries in New York in 1969 by Angelo R. Mozilo, a butchers son from the Bronx, and David Loeb, a founder of a mortgage banking firm in New York. Largest provider of home loans by the 90s Created House America in 1992 that enabled more consumers to qualify for home loans as well as to make smaller down payments. Specialized in Subprime loans. Loaned money to low-income and minority borrowers along with highrisk borrowers. In 1999 serviced $216.5 billion in loans. Between 1982 and 2003, Countrywide delivered a 23,000 percent return to its investors. Employed 62,000 employees and operated 900 offices. Angelo Mozilos estimated income from Countrywide estimated at 470 million. Bought by Bank of America in July 2008. 2. What details are missing in the case that may be important to know? It is widely believed that the government mandated Countrywide to establish a program to provide loans to minoritys even though they had less than perfect credit and low paying jobs.

3. What is the ethical issue at the heart of the case? Countrywide was a predatory lender who specialized in lending to people who couldnt afford them. They paid mortgage brokers big fees to get people to buy their product and lured them in with low interest fees which they increased after a set amount of time. They also charged fees for everything that they did when it came to servicing the loans which brought them hundreds of millions of dollars. When the sub lending scheme started to unravel, Angelo Mozilo sold hundreds of millions of stock while thousands of homeowners lost their homes.
4. List all stakeholders involved.

Countrywide Financial Case Study 2

Homeowners were the biggest stakeholders and then employees and finally stock holders. 5. For each stakeholder list the concerns they may have. The homeowners were stuck with payments that they could not afford after their teaser interest rates increased from single digit rates to double digit rates. Due to this, banks began foreclosing homes which soon caused a gluttony of homes on the market. As the scheme began to unravel and Countrywide began to lose money, staff was cut at the offices putting thousands of workers out of work. The investors were losing money as the stock of Countrywide went down after people started defaulting on their loans. In 2007, Countrywide depreciated by over $20 billion and absorbed over $1 billion in losses.

6. List all of the main possible solutions. Since Countrywide was acquired by Bank of America and is no longer in business, all one can do is speculate as to what could have been done to prevent the downfall. I believe that if Countrywide would have been more careful as to whom it loaned money to and not of lended to people that couldnt afford the loan payments, they wouldnt of crashed the way they did. Countrywide should not of accepted Liar Loans loans in which people misstated their income by up to 50%. People often did this under the direction of the salesman selling them the home. I for one was encouraged to do this in 2001 when I applied for a loan while in Texas. When I got the home and discovered that I could not afford the payment, I was able to roll back the deal because even though I did not misstate my income like I was asked to do, the salesman listed that my son received SSI which he didnt, and I was able to provide a secretly recorded tape of the salesman trying to get me to lie.