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Countrywide CEO Angelo Mozilo Pays $22.5 Million Penalty

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Guest LAW

The Securities and Exchange Commission today announced that former Countrywide Financial CEO Angelo Mozilo will pay a record $22.5 million penalty to settle SEC charges that he and two other former Countrywide executives misled investors as the subprime mortgage crisis emerged. The settlement also permanently bars Mozilo from ever again serving as an officer or director of a publicly traded company.Mozilo’s financial penalty is the largest ever paid by a public company's senior executive in an SEC settlement. Mozilo also agreed to $45 million in disgorgement of ill-gotten gains to settle the SEC’s disclosure violation and insider trading charges against him, for a total financial settlement of $67.5 million that will be returned to harmed investors.

 

Former Countrywide chief operating officer David Sambol agreed to a settlement in which he is liable for $5 million in disgorgement and a $520,000 penalty, and a three-year officer and director bar. Former chief financial officer Eric Sieracki agreed to pay a $130,000 penalty and a one-year bar from practicing before the Commission. In settling the SEC’s charges, the former executives neither admit nor deny the allegations against them.

 

The penalties and disgorgement paid by Sambol and Sieracki will also be returned to harmed investors.

 

“Mozilo’s record penalty is the fitting outcome for a corporate executive who deliberately disregarded his duties to investors by concealing what he saw from inside the executive suite — a looming disaster in which Countrywide was buckling under the weight of increasing risky mortgage underwriting, mounting defaults and delinquencies, and a deteriorating business model,” said Robert Khuzami, Director of the SEC's Division of Enforcement.

 

John McCoy, Associate Regional Director of the SEC’s Division of Enforcement, added, “This settlement will provide affected shareholders significant financial relief, and reinforces the message that corporate officers have a personal responsibility to provide investors with an accurate and complete picture of known risks and uncertainties facing a company.”

 

The settlement was approved by the Honorable John F. Walter, United States District Judge for the Central District of California in a court hearing held today.

 

The SEC filed charges against Mozilo, Sambol, and Sieracki on June 4, 2009, alleging that they failed to disclose to investors the significant credit risk that Countrywide was taking on as a result of its efforts to build and maintain market share. Investors were misled by representations assuring them that Countrywide was primarily a prime quality mortgage lender that had avoided the excesses of its competitors. In reality, Countrywide was writing increasingly risky loans and its senior executives knew that defaults and delinquencies in its servicing portfolio as well as the loans it packaged and sold as mortgage-backed securities would rise as a result.

 

The SEC’s complaint further alleged that Mozilo engaged in insider trading in the securities of Countrywide by establishing four 10b5-1 sales plans in October, November, and December 2006 while he was aware of material, non-public information concerning Countrywide’s increasing credit risk and the risk regarding the poor expected performance of Countrywide-originated loans.

 

In addition to the financial penalties, Mozilo and Sambol consented to the entry of a final judgment that provides for a permanent injunction against violations of the antifraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. Mozilo also consented to the entry of a permanent officer and director bar, and Sambol consented to the entry of a three-year bar.

 

Sieracki agreed to a permanent injunction from further violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act, and consented to a one-year bar under the Commission’s Rule of Practice 102(e)(3).

 

The SEC investigation that led to the filing and settlement of this enforcement action was conducted by Michele Wein Layne, Spencer E. Bendell, Lynn M. Dean, Paris Wynn, and Sam Puathasnanon. Together with Associate Regional Director John M. McCoy, that same team has been handling the SEC’s litigation.

 

The SEC has filed many other enforcement actions involving mortgage-related securities and mortgage-related products linked to the financial crisis, including:

 

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Guest Always Red

Barbara Boxer should disclose all of her dealings (the complete terms of the loans) with Countrywide Home Loans and Angelo Mozilo.

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Guest human

Red let it be. The democrats with Obama are pushing their agenda through administratively.

Right now investments into this country is considered POISON.

 

The contacts that I have love this country, but the climate for business in this country is hands off and the folks that I know are powerful.

 

I'm concentrating on Business Friendly States, and the ones that are not; I hope that they follow suit because if they don't? Then they have written their own epitaphs.

 

 

 

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Barbara Boxer should disclose all of her dealings (the complete terms of the loans) with Countrywide Home Loans and Angelo Mozilo.

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Guest human

Ron, I believe in equal pay for equal work, as for the rest? We have already been through that.

 

There is only 1 type of politics left for me; And that is bringing good paying sustainable jobs to the people of this country.

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Would poison be the fair pay act, health care reform and Wall Street overhaul?

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Guest Ron

Ron, I believe in equal pay for equal work, as for the rest? We have already been through that.

 

There is only 1 type of politics left for me; And that is bringing good paying sustainable jobs to the people of this country.

--------------------------------------------------------------------------------------------------

 

Human that is good. All people should be treated fairly. What is your position on regulating financial institutions like Countrywide?

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Guest HUMAN

Fannie Mae, Ginnie Mae, and Freddie Mac are NOT in the Financial Reform Bill.

That says alot of where you group stands on financial reform.

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Human that is good. All people should be treated fairly. What is your position on regulating financial institutions like Countrywide?

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Guest HUMAN

Oh no no no no!! The government set the laws on this one, and when the republicans tried to fix it, the democrats yelled out DISCRIMINATION.

 

Nothing was done and we are all feeling it.

NO NO NO NO, not ever again.

 

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I think what both of you should admit is both the regulators and the bankers are corrupt.

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Would you agree that government regulators were corrupted in the Federal Reserve, Treasury, SEC and Minerals and Management agency?

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Guest human

I'm waiting for Ron to respond.

 

I'm waiting to see how he will justify the financial reform Bill with out ginnie,fannie,freddie in it.

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Guest ALWAYSRED

I wonder if Ron got a special deal from Countrywide.

 

http://www.scpr.org/news/2010/07/15/california-gop-rep-issa-vip-loans-given-countrywid/

 

A Republican lawmaker says documents show the former Countrywide Financial Corp. may have targeted Senate employees for sweetheart mortgage deals.

 

California Republican Darrell Issa says a dozen loans processed by Countrywide's VIP unit went to borrowers who identified their workplace as the office of Sen. Robert Bennett, a Utah Republican.

 

Issa also said 18 VIP loans went to borrowers who identified "U.S. senator" or "U.S. Senate" as their place of employment.

 

Issa is the ranking Republican on the House Oversight and Government Reform Committee. He wrote the Senate ethics committee about his findings, but did not name any senators other than the reference to Bennett's office.

 

Countrywide was acquired by Bank of America. The bank has produced the records under a subpoena by the House committee.

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Guest Ron

I'm waiting for Ron to respond.

 

I'm waiting to see how he will justify the financial reform Bill with out ginnie,fannie,freddie in it.

 

Human,

Here is your answer.

 

http://www.businessweek.com/investing/insights/blog/archives/2008/09/fannie_mae_and.html

 

Fannie Mae and Freddie Mac were victims, not culprits

 

Posted by: Aaron Pressman on September 26, 2008

 

There’s a dangerous — and misleading — argument making the rounds about the causes of our current credit crisis. It’s emanating from Washington where politicians are engaging in the usual blame game but this time the stakes are so high that we can’t afford to fall victim to political doublespeak. In this fact-free zone, government sponsored mortgage giants Fannie Mae and Freddie Mac caused the real estate bubble and subprime meltdown. It’s completely false. Fannie Mae and Freddie Mac were victims of the credit crisis, not culprits.

 

Start with the most basic fact of all: virtually none of the $1.5 trillion of cratering subprime mortgages were backed by Fannie or Freddie. That’s right — most subprime mortgages did not meet Fannie or Freddie’s strict lending standards. All those no money down, no interest for a year, low teaser rate loans? All the loans made without checking a borrower’s income or employment history? All made in the private sector, without any support from Fannie and Freddie.

 

Look at the numbers. While the credit bubble was peaking from 2003 to 2006, the amount of loans originated by Fannie and Freddie dropped from $2.7 trillion to $1 trillion. Meanwhile, in the private sector, the amount of subprime loans originated jumped to $600 billion from $335 billion and Alt-A loans hit $400 billion from $85 billion in 2003. Fannie and Freddie, which wouldn’t accept crazy floating rate loans, which required income verification and minimum down payments, were left out of the insanity.

 

There’s a must-read study by staff members of the Federal Reserve Bank of New York analyzing the roots of the subprime crisis that came out in March. I don’t think it got much attention then as the conclusions seemed uncontroversial at the time. But now that Washington politicians are trying to rewrite history, it should be mandatory reading for every American interested in knowing how we got here.

 

The study identifies five causes of the subprime meltdown:

-Convoluted loan products that consumers didn’t understand.

-Credit ratings that didn’t do a good job highlighting the risks contained in subprime-backed securities.

-Lack of incentives for institutional investors to do their own research (they just relied on the credit ratings).

-Predatory lending and borrowing (which I think means fraud perpetrated by borrowers).

-Significant errors in the models used by credit rating agencies to assess subprime-backed securities.

 

You’ll note in the Fed’s five causes that there’s some culpability for lenders, borrowers, investors and credit raters. There’s no blame for Freddie Mac or Fannie Mae which had little or nothing to do with the entire situation.

 

It’s certainly fair to criticize Fannie and Freddie over real issues that contributed to their downfall. The companies had numerous accounting problems and inadequate safeguards covering their own investment portfolios. Those weaknesses came home to roost when the real estate market cratered. Fannie and Freddie purchased billions of dollars of subprime-backed securities for their own investment portfolios and got hit just like every other investor. But it’s some kind of crazy, politically inspired CYA to blame for the mess we’re in.

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Guest human

Oh Okay! They WERE VICTIMS

 

Even though they own most of the Home Mortgages. That makes a whole lot of sense.

 

---------------------------------------------------------------------------------------------------

Human,

Here is your answer.

 

http://www.businessweek.com/investing/insights/blog/archives/2008/09/fannie_mae_and.html

 

Fannie Mae and Freddie Mac were victims, not culprits

 

Posted by: Aaron Pressman on September 26, 2008

 

There’s a dangerous — and misleading — argument making the rounds about the causes of our current credit crisis. It’s emanating from Washington where politicians are engaging in the usual blame game but this time the stakes are so high that we can’t afford to fall victim to political doublespeak. In this fact-free zone, government sponsored mortgage giants Fannie Mae and Freddie Mac caused the real estate bubble and subprime meltdown. It’s completely false. Fannie Mae and Freddie Mac were victims of the credit crisis, not culprits.

 

Start with the most basic fact of all: virtually none of the $1.5 trillion of cratering subprime mortgages were backed by Fannie or Freddie. That’s right — most subprime mortgages did not meet Fannie or Freddie’s strict lending standards. All those no money down, no interest for a year, low teaser rate loans? All the loans made without checking a borrower’s income or employment history? All made in the private sector, without any support from Fannie and Freddie.

 

Look at the numbers. While the credit bubble was peaking from 2003 to 2006, the amount of loans originated by Fannie and Freddie dropped from $2.7 trillion to $1 trillion. Meanwhile, in the private sector, the amount of subprime loans originated jumped to $600 billion from $335 billion and Alt-A loans hit $400 billion from $85 billion in 2003. Fannie and Freddie, which wouldn’t accept crazy floating rate loans, which required income verification and minimum down payments, were left out of the insanity.

 

There’s a must-read study by staff members of the Federal Reserve Bank of New York analyzing the roots of the subprime crisis that came out in March. I don’t think it got much attention then as the conclusions seemed uncontroversial at the time. But now that Washington politicians are trying to rewrite history, it should be mandatory reading for every American interested in knowing how we got here.

 

The study identifies five causes of the subprime meltdown:

-Convoluted loan products that consumers didn’t understand.

-Credit ratings that didn’t do a good job highlighting the risks contained in subprime-backed securities.

-Lack of incentives for institutional investors to do their own research (they just relied on the credit ratings).

-Predatory lending and borrowing (which I think means fraud perpetrated by borrowers).

-Significant errors in the models used by credit rating agencies to assess subprime-backed securities.

 

You’ll note in the Fed’s five causes that there’s some culpability for lenders, borrowers, investors and credit raters. There’s no blame for Freddie Mac or Fannie Mae which had little or nothing to do with the entire situation.

 

It’s certainly fair to criticize Fannie and Freddie over real issues that contributed to their downfall. The companies had numerous accounting problems and inadequate safeguards covering their own investment portfolios. Those weaknesses came home to roost when the real estate market cratered. Fannie and Freddie purchased billions of dollars of subprime-backed securities for their own investment portfolios and got hit just like every other investor. But it’s some kind of crazy, politically inspired CYA to blame for the mess we’re in.

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Guest Tea Party Patriot

Predatory and irresponsible lending practices created this crisis for millions of American homeowners. Investment Banks, Government Institutions, Regulatory Agencies, the Department of Treasury, and the Federal Reserve knew those mortgages would go bad. They just thought all the foreign investment coming in would wash away the foreclosure rate. Our Economic leaders decided that it was our best interest to move from being an industrial leader to outsourcing in the name of profit. That is what Capitalism is.

 

Capitalism is an economic system in which the means of production are privately owned and operated for a private profit; decisions regarding supply, demand, price, distribution, and investments are made by private actors in the market rather than by central planning by the government; profit is distributed to owners who invest in businesses, and wages are paid to workers employed by businesses and companies.

 

The economy of the United States has evolved to Corporate and State monopolies. Both are designed to dominate over small business. Leaders on both sides pit the working class against each other to control their personal agendas. At this point, political parties are blaming the other side for the mistakes of this crisis. The problem is that both parties are guilty of outsourcing our jobs to foreign ideologies.

 

We still can make a difference. Vet your candidate. Ask their opinion of foreign outsourcing. We can't protect our freedom with sticks and stones.

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Guest DC Government Worker

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 203

[Docket No. FR–5156–P–01]

RIN 2502 AI58

Federal Housing Administration (FHA)

 

Single Family Lender Insurance Process:

Eligibility, Indemnification, and Termination

AGENCY: Office of the Assistant

Secretary of Housing—Federal Housing

Commissioner, HUD.

ACTION: Proposed rule.

 

 

SUMMARY: Through this proposed rule, HUD continues its efforts to improve and expand the risk management activities of the Federal Housing Administration (FHA). The proposed regulatory changes will update and enhance the Lender Insurance process through which the majority of FHA insured mortgages are endorsed for insurance. Most significantly, the proposed rule would provide additional guidance on HUD’s regulations implementing the statutory requirements regarding mortgagee indemnification to HUD of insurance claims in the case of fraud,

misrepresentation, or noncompliance with applicable loan origination requirements.

 

The proposed rule also provides that mortgagees must continually maintain the acceptable claim and default rate required for eligibility to initially be delegated Lender Insurance authority, in order to retain such authority. In addition, this proposed rule also provides that HUD

will review Lender Insurance mortgagee performance on a continual basis.

 

HUD also proposes to revise the methodology for determining acceptable claim and default rates, to more accurately reflect mortgagee performance, and to streamline the approval process for

Lender Insurance mortgagees that have undergone a corporate restructuring.

 

The Department has also taken the opportunity afforded by this proposed rule to make two technical corrections to the regulations and to solicit public comment on whether FHA mortgagees

should be required to submit mortgage loan case binders to HUD electronically.

 

DATES: Comment Due Date: December 7, 2010.

 

ADDRESSES: Interested persons are invited to submit comments regarding this proposed rule to the following:

 

Regulations Division

Office of General Counsel,

Department of Housing and Urban Development

451 Seventh Street, SW.

Room 10276, Washington, DC 20410–0500.

 

Communications must refer to the above docket number and title. There are two methods for submitting public comments. All submissions must refer to the above docket number and title.

 

Interested persons may submit comments electronically through the Federal eRulemaking Portal at

 

http://www.regulations.gov.

 

HUD strongly encourages commenters to submit comments electronically. Electronic submission of comments allows the commenter maximum time to prepare and submit a comment, ensures timely receipt by HUD, and enables HUD to make them immediately available to the public.

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Guest LAW

This topic needs more context.

 

Regional Economy and Housing Update

October 19, 2010

William C. Dudley, President and Chief Executive Officer

Remarks at the Quarterly Regional Economic Press Briefing, New York City

 

Beginning around 2003, underwriting standards for residential mortgages were significantly relaxed, leading to a sharp rise in household borrowing and in home prices. The rise in home prices helped to support additional demand for credit as households used the collateral represented by their homes to borrow large sums of money via home equity lines of credit and second mortgages. This also fueled a strong boom in home construction. But house price increases could not be sustained without limit. When home prices peaked and started to turn down, the dynamic linking house prices, credit and consumption went into reverse, forcing substantial adjustments on the part of the household sector and in the housing market itself.

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