A year ago, Countrywide Financial Corp. Chairman and Chief Executive Angelo R. Mozilo was boasting that the looming shakeout in home prices and hike in mortgage interest rates would usher in a period of remarkable prosperity for his company.
"I have 53 years of experience. . . and this is nothing compared to 25% prime and 17.5% mortgage rates and 10% unemployment," he told a conference of bond investors last September, pooh-poohing the effect of rising rates.
He assured his audience that Countrywide's "proprietary technology" would help it meet its goal "to avoid any foreclosure." Countrywide invariably kept to "prudent underwriting guidelines," he said, to ensure that its adjustable-rate borrowers could handle the highest interest rates that might kick in during the life of their mortgage.
"This is when we shine," he said, calling Calabasas-based Countrywide "an industry leader" and "a role model to others in terms of responsible lending."
Today, the picture looks much different. Countrywide's financial reports and recent comments by Mozilo and other executives show that the company, the nation's largest mortgage lender, has been less a role model in the home-loan market than a prisoner of competitive trends.
Delinquency and foreclosure rates have soared on many Countrywide loans, including mortgages that were thought to be relatively sound, such as home-equity lines of credit.
The tone of executives' comments has gone from complacent to almost apocalyptic. "We are experiencing home price depreciation almost like never before, with the exception of the Great Depression," Mozilo said in a July 24 conference call with securities analysts.
The company's traditional frames of reference for the performance of its loan portfolio, he added, may no longer be "a fair comparison in light of what is happening to real estate values."
As for his claims that Countrywide's broad mix of revenue-producing activities would allow it to beat back competition from investment banks and other rivals -- "we had them surrounded," he said last year -- more recently the company has been in the role of supplicant.
On Aug. 22, it accepted a $2-billion infusion from Bank of America Corp. on terms that will allow the bank to acquire as much as a 16% stake in Countrywide at a cut-rate price of $18 a share. Analysts are still debating whether the investment in preferred stock -- paying BofA a dividend of 7.25% until it is converted into common stock -- is a vote of confidence or a sign of Countrywide's weakness.
