Critics blame Countrywide's Angelo Mozilo for housing fiasco

Angelo Mozilo struggled last week to bid farewell to No. 1 home lender Countrywide Financial, the company he led for 39 years, only to see it toppled by misadventures in high-risk mortgages.

The usually silk-smooth Mozilo garbled words and at one point knocked over his microphone at a special shareholder meeting.

Looking grim and sounding resigned, he said the era of independent home lenders such as Countrywide was at an end. Still, he added, "Countrywide is a great American story."

But as Bank of America takes over Countrywide today, some observers are portraying Mozilo as the headstrong protagonist in the lender's saga who became blinded by ambition and pride — and helped create the national housing fiasco.

"He was an admired and feared competitor," said Paul Muolo, an editor at industry newsletter National Mortgage News and co-author of a book on the lending debacle, "Chain of Blame," that is due out this month. "But now his reputation is trashed."

Mozilo, the 69-year-old son of a Bronx butcher, didn't respond to requests for details of his plans for the future. Former associates said they assumed Mozilo, married for 50 years and a grandparent many times over, would spend time with his family and defending himself against lawsuits.

Mozilo's downfall was his lust to have Countrywide become the biggest provider of every kind of mortgage, Muolo said. That included subprime loans for people with poor credit or heavy debt loads and also "option ARMs," the tricky adjustable-rate loans that allowed borrowers to pay so little that their balance could rise instead of fall.

Citing problems with those and other complex mortgages, the attorneys general of California and Illinois sued Mozilo and Countrywide last week, alleging that borrowers were buried in unaffordable loans as a result of unfair and misleading business practices.

Mozilo also faces investigations by the Securities and Exchange Commission and federal prosecutors into his exercises of stock options that allowed him to pocket millions of dollars as Countrywide's fortunes worsened.

And his reputation for regarding Countrywide as a personal fiefdom has been reinforced by recent accounts of how he intervened on behalf of politicians, athletes and other "friends of Angelo" to give them mortgages on highly favorable terms.

The deal's value has shrunk from $6 billion to $2.5 billion as Bank of America's share price has declined, partly out of concern about the wisdom of the acquisition. Early last year, Countrywide was worth more than $25 billion on paper.

Ken Lewis, Bank of America's CEO, made clear from the start that Mozilo would depart after the deal closed, with Bank of America's more conservative management and lending styles to prevail.

"I've always told my colleagues at Countrywide not to fear change but instead to embrace it," Mozilo said Wednesday as shareholders voted to approve the sale to Bank of America.

"This has been a difficult time for all of us involved at Countrywide. But I have learned over the past year that it's not only change that must be embraced, but the inevitable."

The end of the Countrywide story was "a total disaster," Muolo said. "His ego sank him. ... He had to be first in everything."