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Lender's CEO Shifts Gears, Will Stay On

The decision by Countrywide's Angelo Mozilo follows Friday's shake-up at the firm.

September 13, 2006|E. Scott Reckard | Times Staff Writer

In a surprise move, Angelo R. Mozilo said Tuesday that he has decided to stay on as chief executive of Calabasas-based Countrywide Financial Corp., the nation's largest mortgage lender.

Mozilo previously had said that he would retire in December, when he turns 68. But at a meeting with investors in New York on Tuesday, he said he expected to sign a new agreement by the end of this month to "extend my role as CEO" at Countrywide.

Wall Street, which has hammered shares of many mortgage lenders in recent months on worries about the housing market slowdown and the potential for rising loan defaults, reacted favorably to Mozilo's change of heart. Countrywide's stock jumped $1.42, or 4.2%, to $34.90, its biggest one-day gain since Feb. 22.

Robert Napoli, an analyst at brokerage Piper Jaffray & Co., said he never believed Mozilo was ready to leave the company the CEO had co-founded in 1969.

"He's just way too engaged, and it's his baby," Napoli said.

Countrywide on Friday announced a shake-up in its top ranks. The company said that Stanford L. Kurland, 54, had retired as president and chief operating officer. Many analysts had expected Kurland to succeed Mozilo as chief executive.

David Sambol, 46, was named to replace Kurland. Sambol had been Countrywide's executive managing director of business segment operations.

Some analysts questioned whether Kurland, a 27-year Countrywide veteran, was retiring because of problems with the business. But at the meeting with investors, Mozilo described Kurland's departure as a personal decision. "His leaving had nothing to do with the financial integrity of the company. The company has never been in better shape," Mozilo said.

Kurland, reached at his home Friday, declined to discuss the circumstances of his departure, but told The Times that Countrywide had "a very good team and I think they will do well."

Originally a specialist in federally subsidized loans for low-income families and veterans, Countrywide under Mozilo has become the nation's biggest home lender by volume.

The company originated $491 billion in mortgages last year, a record for the company and the industry.

Countrywide earned $722 million in the second quarter, up 27% from a year earlier. But its loan volume plunged 19% in July from a year earlier, and Mozilo has warned Wall Street about the potential for much more weakness in the housing market after the boom of recent years.

The company's stock, which hit a record closing high of $42.46 on May 15, slumped during the summer amid worries about the housing market. It closed at $32.45 on Aug. 25, down 24% from its record high and the lowest since February.

Napoli, the analyst, said that the mortgage business would probably be tough for the next 18 months but that Countrywide was poised to deliver "reasonably good" earnings through the downturn and healthy returns to investors when the business improves again. He said he expected Mozilo, who also holds the title of chairman, to remain chief executive for another three or four years and chairman for as long as a decade more.

Mozilo has drawn criticism from shareholders and corporate governance experts for his hefty compensation. He earned $165 million in total compensation last year, including stock option gains. Holders of 43% of the company's stock voted at the annual meeting in June for a measure that would have given shareholders an advisory vote over executive pay at the company.

But Jimmy Glickenhaus, general partner of Glickenhaus & Co. investment firm in New York, which has been an investor in Countrywide since it went public, said he welcomed Mozilo's staying on. Mozilo not only built the company into the industry leader, he said, but helped to reinvent the entire mortgage industry by selling loans bundled into securities on Wall Street and selling services such as title insurance and banking to his borrowers.

Countrywide shares have risen 450% since the end of 1999. The company's stock market value is about $21.3 billion.

Glickenhaus noted that several big Wall Street investment banking firms have purchased home lending firms recently -- drawn by the raw material from which the firms create mortgage-backed bonds, which are gobbled up by investors around the world.

Merrill Lynch & Co. last week agreed to buy National City Corp.'s First Franklin Financial home lending unit for $1.3 billion.

"I think Angelo has looked into the future and he sees that at some point one of the big banks is going to take him over," Glickenhaus said. "He's a great guy. And I think one day he's going to sell that company for a very high price."

Mozilo didn't respond to a request for comment.

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