Angelo Mozilo, the former CEO of Countrywide Financial, has kept a low profile since being branded the face of the mortgage crisis a decade ago. This week he gave a rare interview to Bloomberg Television to sound a warning about the luxury segment of the housing market.
Homes in the upper end of the market in northeastern and coastal states such as New York and California may lose as much as 40% in value as a result of the Republican tax bill passed in the closing days of 2017, Mozilo said. That would surpass the decline in the overall market during the housing crash that began in 2007.
The tax bill signed by President Donald Trump limited write-offs for mortgage interest and capped deductions for state and local taxes, known as SALT, at $10,000. New York, New Jersey, Connecticut and California -- states with a disproportionate number of luxury homes that also have high property taxes to support schools and local services -- are suffering as a result, Mozilo told Bloomberg.
“This tax bill was devastating to the middle-to-higher-income homeowner who can’t deduct anything except $10,000,” Mozilo said. “The volume of sales has dropped dramatically, and values are coming down dramatically, particularly on the upper end.”
While wealthy residents in the Northeast and on the West Coast are being directly impacted, Mozilo also predicted the fallout would eventually reverberate throughout the economy.
“Housekeeping staff and gardeners will be fired, restaurants will lose business and the banks that own those mortgages will have to take write-downs and begin foreclosures,” the story said, paraphrasing Mozilo.
When Bloomberg asked why he’s resurfaced after 10 years out of the public eye, Mozilo said he “has great concerns for the country” and, at this point of his life, “it’s time for me to speak my mind.”
Mozilo, the son of a New York butcher who started a two-person lending business in the 1960s and built it into the biggest mortgage company in the nation, was named by CNN and Time as one of the people most responsible for the 2008 mortgage meltdown.
In the Bloomberg interview, Mozilo blamed banks, politicians and bond-rating companies for the financial collapse that began with mortgage markets in the U.S. and spread across the globe.
“Let them believe what they want to believe,” he said. “I never saw it coming. Never.”
In 2010, Mozilo reached a settlement with the Securities and Exchange Commission that did not involve him admitting fault. Mozilo agreed to pay $67.5 million and accept a lifetime ban on serving as an officer or director of a public company. It was the largest settlement by an executive connected to housing collapse.