One of most notorious people at the center of the housing crisis is reportedly off the hook for any supposed malfeasance, as Bloomberg is reporting that the Department of Justice is abandoning its attempt to sue Angelo Mozilo, the founder of Countrywide, for his company’s lending practices in the run-up to the housing crisis.
Countrywide originated more mortgages in this country from 2004 to 2007 than any other lender. During that time, Countrywide closed so many subprime mortgages it remained a top-5 producer for that home loan product. The same goes for other loans, such as Alt-A.
The DOJ first began seeking a civil suit against Mozilo two years ago, after the statute of limitations expired for any criminal charges that could have been filed against Countrywide’s founder.
Mozilo long held that Countrywide “didn’t do anything wrong” when it came to the lender’s underwriting and origination practices.
In 2014, Mozilo told Bloomberg that he felt his company was not to blame for the subprime mortgage crisis.
“You’ll have to ask those people, ‘What do you have against Mozilo, what did he do?’” Mozilo said in 2014.
“Countrywide didn’t change. I didn’t change. The world changed,” he continued. “No, no, no, we didn’t do anything wrong,” he said, adding that a real estate collapse was the root of the crisis. “Countrywide or Mozilo didn’t cause any of that.”
And now, it appears that the DOJ is unable or unwilling to proceed with its case against Mozilo.
U.S. prosecutors have abandoned their case against Angelo Mozilo, a pioneer of the risky subprime mortgages that fueled the financial crisis, after a two-year quest to bring a civil suit against him.
The Justice Department has decided not to sue Mozilo, the co-founder of Countrywide Financial Corp., according to people familiar with the matter. That effectively ends nearly a decade of U.S. scrutiny of a man who became a face of risky lending practices and later an emblem of the government’s mixed success in holding individuals accountable.
As Bloomberg notes, the decision to abandon the case against Mozilo comes less than a month after the DOJ was handed a stunning rebuke by the United States Court of Appeals for the Second Circuit, which overturned a $1.27 billion penalty against the Bank of America in a fraud case over defective mortgages sold by Countrywide.
In 2013, a federal jury ruled that BofA and Countrywide were liable for defrauding Fannie Mae and Freddie Mac by selling toxic mortgage loans to the government-sponsored enterprises.
But the court of appeals overturned that ruling, stating:
On appeal, Defendants argue that the evidence at trial shows at most an intentional breach of contract—i.e., that they sold mortgages that they knew were not of the quality promised in their contracts—and is insufficient as a matter of law to find fraud. We agree, concluding that the trial evidence fails to demonstrate the contemporaneous fraudulent intent necessary to prove a scheme to defraud through contractual promises. Accordingly, we reverse with instructions to enter judgment in favor of Defendants.
That decision also exonerated Rebecca Mairone, who the New York Times once referred to as the “face of the housing crisis.” Mairone, who now goes by her maiden name, Rebecca Steele, is a former executive at Countrywide and one of the few individuals whose actions during the housing crisis landed them in legal trouble.
But the court of appeals also overturned the fraud charges and voided the $1 million penalty against Steele.
And now Mozilo joins Steele as Countrywide execs that escaped the government’s crosshairs relatively unscathed.