Countrywide: Mortgage Controls Have Gone Too Far
Countrywide Financial CEO Angelo Mozilo told a congressional panel Friday that he is "extremely concerned" that recent tightening of mortgage underwriting criteria has gone too far.
"For the market to recover, underwriting guidelines need to strike a better balance between providing borrowers with access to loans and lenders and investors with the assurance that these loans will be repaid," he said in remarks to be given to a House committee hearing.
Mozilo urged Congress to reform the Federal Housing Administration, expand tax-exempt mortgage revenue bonds for both home purchases and refinancing and to take other steps to address the widening crisis in mortgage finance markets.
"This is the worst housing market I have ever seen," Mozilo said in written testimony for the House Oversight and Government Reform Committee, chaired by Rep. Henry Waxman.
Mozilo urged raising loan limits for government-chartered housing finance giants Fannie Mae and Freddie Mac , as well as other steps Congress could take, such as reforming the Federal Housing Administration, giving first-time homebuyers a tax cedit and expanding tax-exempt mortgage revenue bonds for home buying and refinancing.
"I also want to strongly suggest that traditional guidelines be reexamined relative to the appraised value of a home versus the outstanding mortgage so that current borrowers can refinance at lower interest rates," he said.
Mozilo is one of three companies implicated in the mortgage crisis that have been asked to explain how they collectively received hundreds of millions of dollars in compensation while their companies were losing money.
In addition to Mozilo, of Countrywide , Stanley O'Neal, formerly of Merrill Lynch & Co.; and Charles Prince, formerly of Citigroup are slated to appear.
According to the committee, Mozilo received $250 million in compensation from Countrywide, the nation's largest mortgage lender, from 1998, when he became CEO, through the end of last year.
It said that Countrywide announced a $1.2 billion loss in the third quarter of 2007 and lost another $422 million in the fourth quarter. By the end of the year the company stock had fallen 80 percent from its five-year peak in February. During the same period, Mozilo received a $1.9 million salary, received $20 million in stock awards contingent upon performance and sold $121 million in stock.
O'Neal received a retirement package of $161 million when he departed last October. But the committee said that if Merrill Lynch had terminated O'Neal for cause rather than allowing him to retire, he would not have been entitled to $131 million of that in unvested stock and options. During 2007 the firm reported $18 billion in writedowns related to subprime and other risky mortgages.
Similarly, Prince received a bonus of $10.4 million for the 2007 performance year and was allowed to retain almost $28 million in unvested stock and stock options because Citigroup allowed him to retire rather than terminating him for cause.