FBI Finds Evidence of Fraud at Countrywide

The Wall Street Journal, in a story about Countrywide Financial’s loss of nearly $1 billion in the first quarter of this year, revealed that the FBI has uncovered evidence of widespread fraud with the company’s mortgages.

A federal probe of Countrywide, the nation’s largest mortgage lender, is turning up evidence that sales executives at the company deliberately overlooked inflated income figures for many borrowers, people with knowledge of the investigation say.

The article focuses on a loan program called Fast and Easy, a no-documentation, stated-income product in which borrowers were not required to present pay stubs, tax returns, or any other evidence that the loan could be repaid.  Countrywide loan officers were not even required to verify employment.

All borrowers needed was a credit score higher than 680.  These loans, incidentally, were classified as “prime.”

Loan officers loved these loans, because there was so little paperwork involved — and very little scrutiny.  Soon, officers realized that all they had to do to qualify their borrowers was to inflate their stated income.

The Federal Bureau of Investigation is looking into a wide variety of Countrywide mortgages that didn’t require full documentation, not just the Fast and Easy loans. People involved in the inquiry say the FBI has concluded that extensive fraud occurred on the loans, and they are looking into whether the company violated securities law by failing to disclose that to investors.

Wouldn’t it be great if Countrywide CEO Angelo Mozilo (right), who blamed the current housing crisis on “an unprecedented series of economic shocks” in testimony before Congress this year, were held personally liable for his company’s role, and was forced to give back his outrageous $120 million in compensation from last year?

The evidence is mounting that Countrywide is Ground Zero for the collapse of the credit markets.  Its executives raked in the dough during the good times.  They should be required to pay it back.

Recent Redfin posts:
Los Angeles, We Have Square Footage
Chaka Kahn Kicked Out of Westchester