When: Thursday, August 23rd at 4:00 PM ET
Where: "Closing Bell with Maria Bartiromo" (M-F 4PM-5PM ET)
The following is the unofficial transcript of Part 2 of CNBC's exclusive interview with Countrywide CEO Angelo Mozilo on CNBC's "Closing Bell with Maria Bartiromo" today at 4:00 PM ET. All references must be sourced to CNBC's "Closing Bell with Maria Bartiromo."
In an exclusive interview with CNBC's Maria Bartiromo, Countrywide CEO Angelo Mozilo discusses Bank of America's $2 billion investment in Countrywide, problems in the mortgage industry and Countrywide's strategy going forward, among other topics.
Interview: Angelo Mozilo, CEO Countrywide (2nd interview, 8/23)
MARIA BARTIROMO, host: Angelo, thanks for joining us.
Mr. ANGELO MOZILO: OK.
BARTIROMO: OK. Can you characterize the environment for us? Where are we right now in the credit crunch?
Mr. MOZILO: I think it's hard to tell exactly where you are. You know, you're sort of in the middle of a jungle, but you don't know if you're halfway through, at the end of it, at the beginning of it. And it just seems to me that we're headed in a better direction than we just came from. I just have that feeling because, one, the market has shrunk. A lot of the players are gone that were here before. Everybody's gotten the message you can't make these loans anymore, even though we tried to make them. So I think from a mortgage point of view, from...(unintelligible)...point of view, we're in a much better place than we were from a lot of perspectives. But from the country's point of view, I don't think we're in a better place. I think that, again, values of real estate continue to go down, delinquencies continue to rise because there's no liquidity. So I think the key to turning that around is creating liquidity in the marketplace for all levels of home buyers, but particularly for first-time home buyers because they drive the values of the rest of the chain.
BARTIROMO: So what does your book tell us right now? The delinquencies are rising, are we seeing that accelerate, defaults rising? Tell me what you're seeing and what's the next shoe to drop? Is it the ratings agencies downgrading?
Mr. MOZILO: Yeah. Well, we've been through that, so I mean, Countrywide, yeah, we've been through that already. And, no, I think that, yeah, we've seen a rise of rates, but I think it's going--to put it in perspective, rise of delinquencies and foreclosures, it was zero. We started from zero because values were going up so quickly, no one went into delinquency. If they did, they sold and got their money back. So were virtually almost at a zero base. So it is was distorted now in that regard. But it is--it has been rising. The pace that it has been rising has slowed down. And so I think that--I wouldn't say we've peaked out, but I think you're going to see the pace of rise slow down over the next year or so.
BARTIROMO: And yet we have a tremendous amount of ARMs resetting this fall. Is it fair to say that we will see further lenders go under?
Mr. MOZILO: Yeah. I think you're going to see further lenders go under for other reasons. So the next lenders going under don't have big servicing portfolios, that sort of thing. But I--the--it's important to note this--in fact, I heard it on CNBC this morning--that there--it's true that there are billions and billions of dollars in 2005, 2006 of these option ARMs and these loans, five-year hybrids that have resets to them. And so what the press has done is taken that block of loans that are all going to reset in 2008 and 9. Not true because people are not stupid. I think there's an ad you guys run like that, that they're refinancing out of these loans. So in Countrywide's case, most of our hybrids, I think it's about 65 percent of our hybrids, that would've been resetting in '07, '08, have already refinanced out of them. So it's not the--you have to take that amount of loans and reduce them by the--by the amount that have been refinanced. A substantial amount have already been refinanced out, so it's not going to be as bad as people think it is.
BARTIROMO: Let's talk about the $2 billion investment from Bank of America. Did you go to other lenders?
Mr. MOZILO: I didn't--no, I didn't go to other lenders, but I did--what I did do is this, in that sense, I did explore at the time this was happening, we had lots of people call us. It wasn't only Bank of America. Lots of people called us to say, `Look, we'd like to make an investment. We think Countrywide's a great company. You've been 40 years, you're the premier company. We want to do this.' And through that process, I felt it was important that I--that if anybody was going to invest in Countrywide, they'd be a premier name, a name that would immediately engendered confidence in the marketplace. And so I selected that company that I thought would do that, and clearly Bank of America did it. But there were--there were four or five companies that wanted to come in and make an investment in Countrywide. And companies that you'd recognize the name. But this was the company that I wanted Countrywide to be attached with.
BARTIROMO: Why would they not want to do it? Look at the terms. Let's face it, Angelo, you've got a high coupon, a convert that's already in the money. People are saying, `Sure, it's great for Bank of America, but the terms are not great for Countrywide.'
Mr. MOZILO: Yeah, they're great for Countrywide. They're fantastic for Countrywide. First of all, it's a very cheap insurance policy, if you took it--look at it in those terms. This was not a matter of looking at stock price. This is a matter of looking at maintaining the integrity of this company that was under siege for no good reason, but it was under siege, the reality was. And the pressure on the people of this company and of the outside world's view of Countrywide was changing rapidly, so this was a very inexpensive insurance policy for the sake of maintaining the integrity of the company and the integrity of our shareholders. And so you have to look at it that point of view, not look at $18 a share or whatever the strike price is on that strike price for the transaction. This was a great transaction for Bank of America, no question about it, but equally better transaction for Countrywide and its shareholders.
BARTIROMO: Walk me through how this has happened and how it's happened so quickly. Last week I was looking at a piece in The New York Times. You see pictures of people going at Countrywide...
Mr. MOZILO: Unbelievable.
BARTIROMO: ...taking money out of the bank. There was a run...
Mr. MOZILO: Unbelievable.
BARTIROMO: ...on the bank.
Mr. MOZILO: Yeah. That would drive--Maria...
BARTIROMO: Can you tell us what has gone on in the last year?
Mr. MOZILO: ...every day I'd wake up and say, `OK, we're through that problem.' And then wake up, you know, I go to work around 4 in the morning, and there was another problem, two problems, three problems. It was incredible because it began feeding itself. And what I found out in this process--because I've never been through anything like this before; I've been through a lot in 55 years, but nothing like this--is that people tend to--their lemmings. They just kept on--all sides, everybody began attacking because fear set in. And everybody's fearful. `I don't want to be the last one left behind in this burning house, so I'm going to get out of here.' And so--and that--and that creates pressure and creates problems. The actions of the people created problems, and I said I really felt for these people that are standing on line. It was terrible. We've got cookies out there and coffee and all kinds of stuff that--because we weren't prepared for that. But it was that bankruptcy note that was put in the analyst's report that said that--that was, you know, yelling fire in a very, very crowded theater. And it was very unfortunate and totally unnecessary. But it happened, and it was people like that, things like that, irresponsible statements, misconceptions, all of that that caused--that caused the issue. And so I had to right the ship right away, and this by far was the best way of doing it. I'm very grateful for Bank of America, frankly, for stepping in and having the confidence in us that they did.
BARTIROMO: And a lot of people expect that, at some point, Bank of America will acquire Countrywide.
Mr. MOZILO: Yeah.
BARTIROMO: Is that in the cards?
Mr. MOZILO: Well, you know, look, I've--I always say to that, this is not part of this deal. You know, this is an investment in Countrywide, a true investment, looking for various things that we can do together in the future. But my interests are aligned with the shareholders. You know, I'm the largest shareholder in Countrywide, individual shareholder. And so whatever is the best for the shareholders down the line, that's my responsibility is to make sure that I protect their interests. But that's not in this transaction.
BARTIROMO: Angelo, you're the largest shareholder, but you've been selling stock.
Mr. MOZILO: Right.
BARTIROMO: I've got to ask you about this. What's the lowest price you've sold at?
Mr. MOZILO: Whatever the--well, the lowest price was 28 because built into the--into my 10b5-1 is a can't sell below $28 a share. There is a tagline at the end of it that if some stuff's left over, it has to sold in a certain number of days. However, this is under a 10b5-1 because--I'm glad you asked me that. This is a constant thing, why am I selling? The reason I'm selling is that it is the majority of my net worth, and I have a big family, nine grandchildren, five children, I have a lot of education to pay for, but--so I have a lot of obligations, but I am sort of at the end of my career, not at the beginning of my career. And I have to plan as to what the future's going to be, and since I own such an enormous number of shares, there's a point at which when do I do this? And so I try to do it in an orderly way. So I did it under the 10b5-1s were put into effect where I don't have control over it. They make the--we draw the contract, whatever the price is, it sells on a day that I don't even know. It's just--and that's what's done, out of my hands, never have any contact with anybody. That was the best say that I thought I could sell without people thinking I know something, I'm doing something, because I only--I can only set them up when I know nothing. And so it just keeps on going along. That to me is the best interest to me and the shareholders. And I believe this stock is going to continue to rise, but under the contract, that's what they had to be sold at was a minimum of $28 a share in the stock, so you've seen those sales lately. And so I have to have an orderly dissolution of them, going to be gone from the company at some point. My contract goes up to 2009. I don't want to be dumping 11--you know, whatever the shares I have to eliminate, shares at in--at once.
Mr. MOZILO: That's not fair to the shareholders. So I've got to do it in an orderly way.
BARTIROMO: Sure. So what is the future, then, for Countrywide? Tell me how you see this debacle playing out?
Mr. MOZILO: Well, I think it's great. First of all, it's made us stronger. It's made us stronger. It's made us, you know, the things we're looking at, we never thought we'd have to look at before because we had--we had access to commercial paper at will, repo lines at will, medium term notes at will. So our financing was never an issue here at Countrywide. It's made us a much stronger company. We have control of all of our data today that we didn't--and I say it was not as expert as it is today. Countrywide's future is going to be great. You know, it's always been great. We've been, you know, we're one of the best performing share stocks and stocks in the New York Stock Exchange for the last 40 years. You know, better than Berkshire Hathaway, and I love Warren, but that it makes me proud to have, you know, people that we beat. Microsoft. We're better than Dell. We're better than all of those to our shareholders. We want to continue doing that. That's who we work for. So I think down the line this is going to be a better company, a more profitable company, and a company that's a great investment for shareholders as we continue down the line because the market ultimately will come to us. This is America. People want to own homes. This will stabilize, and we'll go on from there. I've been through crisis before, never like this, but everyone of these you come out stronger, better and with less competition. And that's where I think we're going.
BARTIROMO: On that note, Angelo, good to have you with us.
Mr. MOZILO: Thank you.
BARTIROMO: Thank you so much. Angelo Mozilo, Countrywide Financial.
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