On the Phone with Countrywide CEO Angelo Mozilo

If you look carefully at the subprime debacle, it’s obvious that one company saw it coming and they didn’t keep lending like mad. That company is Countrywide Financial , and the CEO, Angelo Mozilo, joined Cramer on the phone to discuss the future of the lending industry and Countrywide, in particular.

Mozilo says about a year ago he mentioned his concern about the margins and overall quality of New Century and Ameriquest. The real problem with the subprime lenders, Mozilo says, was that they had a bad business model, and it just kept getting replicated.

“We began pulling back and changing our guidelines at that time,” he says. He points out that Countrywide is essentially a prime lender, as subprime lending only represented 7-9% of its business in 2006.

Cramer asks if the recent collapse in the subprime market means all the speculators – that is, the people who were trying to get loans to buy houses just to flip them and make money – have been cleaned out. If they are out of the game, then the only people that remain are hard-working people who may need the subprime lenders because they just can’t get a mortgage otherwise.

Mozilo notes that there is a threat to these people as “liquidity is being taken away by the Fed and maybe by legislators.” He thinks that “all those doors have been closed” for the speculators, and the damage done by fraud is mostly over. But regular people can’t get shut out along with them or else the housing market would be further impacted.

Much of Countrywide’s competition is disappearing “overnight,” Mozilo says. Companies both above and below the radar are folding, and many of their people are coming over to Countrywide. “We were the dominant player before, and we’re going to be a major dominant player now,” he says.

Cramer says that if you believe, like he does, that the Fed is going to start cutting rates in May, then you need to start thinking about a subprime survivor. And Angelo Mozilo’s Countrywide Financial is just that.

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