Countrywide Financial

Countrywide Financial
Name	Countrywide Financial
Type	Public
Industry	Mortgage lending
Fate	Acquired by Bank of America
Founded	1969
Founder	Angelo Mozilo
Defunct	2008 (brand absorbed)
Headquarters	Calabasas, California
Key people	Angelo Mozilo

Countrywide Financial was a major American mortgage lender and financial services company that grew into one of the largest originators of residential mortgages in the United States. During the 1990s and 2000s Countrywide expanded through acquisitions and securitization partnerships, becoming entwined with institutions such as Goldman Sachs, Morgan Stanley, Lehman Brothers, Bear Stearns and American International Group. Its lending practices, regulatory scrutiny, and role in the subprime mortgage crisis drew attention from entities including the Securities and Exchange Commission, the United States Department of Justice, and members of the United States Congress.

History

Countrywide emerged from the mortgage activities of Irving Trust Company-era personnel and was formally founded by Angelo Mozilo in 1969. Through the 1980s and 1990s the firm expanded amid the fallout from the Savings and loan crisis and alongside firms such as Fannie Mae and Freddie Mac in the secondary mortgage market. Countrywide pursued aggressive retail expansion and portfolio growth similar to contemporaries like Wachovia and Washington Mutual (WaMu), acquiring mortgage brokers and loan servicing firms and tapping capital markets via relationships with Merrill Lynch and Citigroup. By the early 2000s Countrywide became a leading correspondent lender to government-sponsored enterprises and private securitizers linked to Ginnie Mae, Deutsche Bank, and Credit Suisse.

Business operations

Countrywide combined mortgage origination, loan servicing, secondary market sales, and mortgage-backed securities issuance. Its counterparties included investment banks such as JPMorgan Chase, UBS, and BNP Paribas and its loan products were distributed through branch networks, brokers, and wholesale channels that paralleled models used by Household Finance Corporation and GMAC Mortgage. Countrywide securitized loans through conduits and underwriting standards that intersected with the practices of Payment Protection Insurance-era lenders and pooled collateral in structures comparable to residential mortgage-backed securities issued by Freddie Mac. The firm also offered adjustable-rate mortgages, interest-only products, and stated-income loans similar to products sold by IndyMac and New Century Financial.

Mortgage lending practices and controversies

Countrywide marketed aggressive products to homebuyers and investors, employing underwriting approaches criticized in investigations led by the Subcommittee on Capital Markets of the United States House Committee on Financial Services and by state attorneys general such as those in California and New York. Allegations involved selective steering, which drew scrutiny comparable to matters at Wells Fargo and Bank of America Corporation; reports accused Countrywide of steering borrowers into higher-cost loans and of weakening documentation standards analogous to issues at Ameriquest. Complaints echoed broader patterns seen in the subprime mortgage crisis where originators such as Option One Mortgage Corporation and New Century faced lawsuits over predatory practices and disclosure failures. Internal memos and depositions revealed links between executive incentives and origination volumes similar to controversies surrounding Enron-era compensation debates.

Regulatory actions and investigations

Countrywide was the subject of multi-jurisdictional probes by federal regulators including the Securities and Exchange Commission and the Office of the Comptroller of the Currency, as well as investigations by state banking departments and state attorneys general. Congressional hearings featured testimony referencing documents that implicated ties with financial institutions like Bank of America and Goldman Sachs. Civil suits invoked statutes enforced by the Department of Justice and consumer protection offices such as the Consumer Financial Protection Bureau precursor entities; parallel enforcement actions resembled those brought against Allied Home Mortgage Capital and Aurora Loan Services. Settlements addressed allegations of defective underwriting, misleading disclosures, and unfair lending practices.

Financial performance and collapse

Countrywide’s rapid growth in originations led to significant revenue during housing expansion, with earnings and market share rivaling major banks such as Chase Manhattan and Bank of America. The housing market downturn beginning in 2006 eroded loan performance, producing losses similar to those experienced by Lehman Brothers and Bear Stearns. Countrywide’s exposure to adjustable-rate resets, subprime portfolios, and securitization counterparty risk precipitated a liquidity crisis that culminated in severe writedowns and capital strain. The firm’s stock plummeted amid comparisons to failures like IndyMac Bank and market disruptions following the 2007–2008 financial crisis.

Acquisition by Bank of America

In 2008 Bank of America agreed to acquire Countrywide in a transaction that paralleled high-profile consolidations such as JPMorgan Chase’s acquisition of Bear Stearns and Wells Fargo’s acquisition of Wachovia. The acquisition transferred servicing rights, loan portfolios, and litigation exposure to Bank of America and triggered further regulatory inquiries by the Federal Reserve and the Federal Deposit Insurance Corporation. Subsequent legal settlements involving Bank of America addressed claims initially raised against Countrywide, and the integration echoed corporate consolidations like the purchase of Merrill Lynch.

Legacy and impact on housing market and regulation

Countrywide’s prominence and collapse influenced policy debates that led to reforms in mortgage underwriting and securitization practices, contributing to legislative and regulatory responses involving entities such as Dodd–Frank and institutions like the Consumer Financial Protection Bureau. The firm’s role in the mortgage boom and bust is studied alongside cases like New Century Financial and Countrywide-adjacent failures to assess systemic risk, underwriting incentives, and the interplay between originators and investment banks. Its legacy informs contemporary scrutiny of mortgage servicing, secondary market underwriting, and capital requirements enforced by the Federal Reserve Board and international bodies such as the Basel Committee on Banking Supervision.

Category:Mortgage lenders of the United States Category:Financial services companies established in 1969