creators.com opinion web
Conservative Opinion General Opinion
Froma Harrop
Froma Harrop
31 Jul 2014
Doing Well by Doing Good -- but Better by Doing Bad

How curious to watch "60 Minutes," the famously hard-hitting TV newsmagazine, bless JPMorgan Chase CEO Jamie … Read More.

29 Jul 2014
What Scares Americans About the Child Migrants

The numbers are small for a large country like this, but the alarm is big over the influx of Central American … Read More.

24 Jul 2014
To Share Is Not Always to Share Alike

The online rental booking service Airbnb is a fast-growing empire that pairs travelers with people wanting to … Read More.

The Mortgage Mogul and His Victims

Comment

As banks, money markets and stock exchanges convulse over a sinking American economy, we see the folks sprawled at the bottom of the smoking rubble — debt-crushed American consumers. It is they whose reckless or trusting natures enriched so many, at least for a while, and whose troubled loans have sent markets into panic.

But let us also note the real-estate operators creeping away from the disaster they helped create with their millions intact. None made a bigger pile off the pile than Angelo Mozilo, former head of Countrywide Financial.

All the planets lined up for Mozilo.

The government could have stopped the excesses of Mozilo and other pushers of ugly mortgages. But the Bush administration was never overly burdened by a conscience. If little people were being tricked into abusive loans — which were then unloaded on unsuspecting investors — well, that's the "free market" for you. The mortgage mongers were important. They kept the housing bubble going.

The American Dream propaganda machine provided the background music: Real estate was played a "must own" for all respectable families and an investment that never fails. Foes of regulation defended the exorbitant fees and delayed-explosive interest rates as socially desirable. Without them, they argued, low-income people — read "minorities" — could not enjoy the blessings of homeownership.

Mozilo understood the rhetoric perfectly. In a Countrywide brochure titled "Working Together to Achieve the Dream," Mozilo pledged "our unflagging dedication to helping lower the barriers to homeownership." The pictures were a parade of American diversity, alongside references to black churches and Countrywide's extensive Spanish-language resources.

Despite Countrywide's slogan, "the best loan possible," the sales force was trained to sweet-talk customers into high-cost mortgages. The company software was rigged to steer borrowers with good credit into subprime mortgages — a trick played with considerable success in black and Hispanic neighborhoods.

Salespeople were discouraged from offering Federal Housing Administration loans, which are generally the best deal for low-income borrowers.

The name of the game for mortgage makers was to pocket big fees upfront. Countrywide and others loaded borrowers with a plethora of fees — for flood certifications, appraisals, preparing the papers ... even for emailing documents.

Shabby lending practices were a given. Many of the mortgages required no downpayment or proof of income. None of this mattered, because Step Two was to pass the risky loans onto the next sucker.

So the mortgage brokers sold the mortgages to investment banks. The investment banks then packaged the loans into securities (and collected their own fees), which they palmed off onto investors. (To make their loans more appealing to investors, Countrywide insisted on big prepayment penalties, making it hard to refinance and trapping borrowers into the high interest rates.)

The party couldn't last. When housing turned bad last year, Countrywide stock lost more than half of its value. But that didn't affect the estimated $414 million Mozilo had already made selling his Countrywide shares from 2004 to 2007.

You say the borrowers should have been more careful, but suppose, for example, you were an ordinary Latino working guy and saw Countrywide listed on the Congressional Hispanic Caucus Institute's "Hogar" (means "hearth") Website as a "trusted friend." (Countrywide had paid $50,000 for that mention.) Wouldn't you have assumed its mortgages were fair?

Did we forget to add that Mozilo was named the National Housing Conference's "Man of the Year" in 2004? Or that the venerable American Banker newspaper gave him its 2006 "Lifetime Achievement Award"?

If Countrywide gets sold to Bank of America as planned, Mozilo could walk off with another $115 million in severance pay — and not give another look at the wreckage he left behind. That's how things work in the Age of Bush.

To find out more about Froma Harrop, and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate web page at www.creators.com.

COPYRIGHT 2008 THE PROVIDENCE JOURNAL CO.

DISTRIBUTED BY CREATORS SYNDICATE, INC.



Comments

3 Comments | Post Comment
I read Froma Harrop's column on the "Mortgage Mogul".

As a hard working, home-owning American, I laugh in Harrop's face when she blames the mortgage mess "on the age of Bush" and Countrywide Financial.

Uhhh, Froma dear, I have a thirty year mortgage on a house I can AFFORD, even though I may have liked to have been greedy like those who now find themselves in trouble for buying more house than they could afford. How about Taking Responsibility For Your Actions? Oh, sorry, I forgot. You are a liberal. Blame someone else. Blame "the Man". Blame evil corporations. But no, don't take ANY responsibility for your own stupidity and greed.

Was the .com bubble burst Clinton's fault? NOOOOO. Too many greedy people trying to make a buck off that rising (and subsequently falling) industry.

In your article, NOWHERE do you factually link President Bush to this mess. It is all a spurious relationship, just as President Clinton was to the .com burst. Just another irrational liberal suffering from Bush Derangement Syndrome.

Please. Once you learn to be a critical thinker, give me a call back. Till then, maybe the miracles of stem cell research will allow you to grow an actual brain!

Cheers!
Keith in Salt Lake City.
Comment: #1
Posted by: Keith
Thu Jan 24, 2008 12:48 PM
You com across as a cheerleader for democrats. If you wrote about our energy crisis and threw it at the feet of G. Bush I would applaud you. Inflation drove this mess and I believe Alan Greenspan enjoyed the limelight too much to increase rates to slow down an overheated economy.I love the way he retired just before the collapse and then wrote a book. Not the type of Fed chairman you want. NO politition spoke out during the good times. Everyone wanted to take credit for it. Not mentioning that middleclass Americans wanting to live like the rich and refi there homes for boats and other luxuries also slants it. Its driven by greed on both ends. Unfortunatally those who can least afford to lose lost the most.
Comment: #2
Posted by: David Boston
Sun Jan 27, 2008 4:00 AM
I just wish that everyone was smart as you. If that were the case we could live in a perfect world, NOT. Actually, you sound like a 5 year old blaming someone else for breaking the lamp. It is so easy to be ignorant and blame one person, our President, when I believe the there is another faction of government that makes laws and supposedly helps protect our citizens. If I remember correctly, that would be our beloved Congress.
The real problem I see is that uninformed people will read your liberal ravings and believe it.
Comment: #3
Posted by: scot
Mon Jan 28, 2008 6:23 PM
Already have an account? Log in.
New Account  
Your Name:
Your E-mail:
Your Password:
Confirm Your Password:

Please allow a few minutes for your comment to be posted.

Enter the numbers to the right:  
Creators.com comments policy
More
Froma Harrop
Jul. `14
Su Mo Tu We Th Fr Sa
29 30 1 2 3 4 5
6 7 8 9 10 11 12
13 14 15 16 17 18 19
20 21 22 23 24 25 26
27 28 29 30 31 1 2
About the author About the author
Write the author Write the author
Printer friendly format Printer friendly format
Email to friend Email to friend
View by Month
David Sirota
David SirotaUpdated 1 Aug 2014
Jill Lawrence
Jill LawrenceUpdated 31 Jul 2014
Froma Harrop
Froma HarropUpdated 31 Jul 2014

Taxpayers and Housing Need a Divorce

21 Apr 2011 Curbing Medicare Costs Without Vouchers

31 Dec 2013 Obama May Be Best Economic President Ever