I noticed a short article this week in the Wall Street Journal that reported on the $108 million settlement between Countrywide Financial and the Federal Trade Commission (FTC).  The settlement stems from accusations that two Countrywide mortgage servicing companies collected excessive fees from cash-strapped borrowers who were struggling to keep their homes. It will be used to reimburse overcharged homeowners whose loans were serviced by Countrywide before it was acquired by Bank of America in July 2008.

Although the $108 million judgement represents one of the largest ever levied by the FTC,that wasn’t what caught my eye. Later in the article there was discussion relating to criminal investigations of the business practices of Countrywide and the possibility that civil charges would be filed against Angelo Mozilo, the past CEO of the company.  The article further stated that legal experts believe criminal charges may be filed against Mr. Mozilo.

I can’t comment on the business practices of Countrywide or the pending charges against the management of Countrywide, but it looks like the U.S. government and the Congress are set on making an example of Countrywide. Right now it appears CFC will serve as a sacrificial lamb to help cleanse the sins of many. 

With Mr. Mozilo at the helm, Countrywide helped shape the industry for more than 2 decades.  They provided a vehicle for mortgage brokers to originate loans and earn a fee. They were the largest wholesale mortgage banker and supported third party originators.  Countrywide also provided take out commitments and access to the secondary mortgage market for small thinly capitalized mortgage bankers.  Through their correspondent channel, Countrywide provided an array of products and services to mortgage bankers, including warehouse lines.  Through their small neighborhood branches, they provide low cost loans to many borrowers.  Without paying high loan officer commissions at these branches, borrowers were able to obtain competitive loan pricing.   And finally, their creative products helped many borrowers obtain homeownership and drive homeownership to historical levels.

Yes, Countrywide and executives of the company had something to do with the current mortgage malaise, but so did many other mortgage professionals, Wall Street executives, traders, mortgage originators, builders...and of course borrowers.  The U.S. government and Congress is not immune either.  They created some of policies to help increase homeownership, but lead to unqualified borrowers buying homes. 

Let’s not have a sacrificial scapegoat for the mess many got us into...