Countrywide Financial Subprime Meltdown Ethics Mandi Hash
Countrywide Financial: Subprime Meltdown Ethics
Countrywide Financial: Subprime Meltdown Ethics
Mandi Hash
Acct 430 81E – Krupka, Joseph
Abstract
“Not long ago, Countrywide Financial seemed to have everything going for it. Cofounded by Angelo Mozilo in 1969, by the early 2000s it had become the largest provider of home loans in the United States. At that time one in six U.S. loans originated with Countrywide. In 1993 its loan transactions reached the $1 trillion mark. Additionally, it was the primary provider of home loans to minorities in the United States and had lowered the barriers of homeownership for lower-income individuals. Countrywide also offered loan closing, capital market, insurance, and banking services to its clients. In the 1970s Countrywide had diversified into the securities market as well. In 1992 Countrywide created a program called “House America” that enabled more consumers to qualify for home loans, as well as to make smaller down payments. In 2003 the company proposed the “We House America” program with the goal of providing $1 trillion in home loans to low-income and minority borrowers by 2010. At the beginning of the twenty-first century, Countrywide’s reputation in the industry was stellar. Fortune magazine called it the “23,000% stock” because between 1982 and 2003, Countrywide had delivered investors a 23,000 percent return, exceeding the returns of Washington Mutual, Walmart, and Warren Buffett’s Berkshire Hathaway. In 1999 the company serviced $216.5 billion in loans. By 2000 the company’s continued increase in revenues was connected in part to home equity and subprime loans. The annual report for that year states, “Fiscal 2000 shows a higher margin for home equity and sub-prime loans (which, due in part to their higher cost structure charge a higher price per dollar loaned).” Subprime loans were a key factor in Countrywide’s immense success and rapid growth. However, the company’s reliance on a lending practice that was
Countrywide Financial: Subprime Meltdown Ethics
Mandi Hash
Acct 430 81E – Krupka, Joseph
Abstract
“Not long ago, Countrywide Financial seemed to have everything going for it. Cofounded by Angelo Mozilo in 1969, by the early 2000s it had become the largest provider of home loans in the United States. At that time one in six U.S. loans originated with Countrywide. In 1993 its loan transactions reached the $1 trillion mark. Additionally, it was the primary provider of home loans to minorities in the United States and had lowered the barriers of homeownership for lower-income individuals. Countrywide also offered loan closing, capital market, insurance, and banking services to its clients. In the 1970s Countrywide had diversified into the securities market as well. In 1992 Countrywide created a program called “House America” that enabled more consumers to qualify for home loans, as well as to make smaller down payments. In 2003 the company proposed the “We House America” program with the goal of providing $1 trillion in home loans to low-income and minority borrowers by 2010. At the beginning of the twenty-first century, Countrywide’s reputation in the industry was stellar. Fortune magazine called it the “23,000% stock” because between 1982 and 2003, Countrywide had delivered investors a 23,000 percent return, exceeding the returns of Washington Mutual, Walmart, and Warren Buffett’s Berkshire Hathaway. In 1999 the company serviced $216.5 billion in loans. By 2000 the company’s continued increase in revenues was connected in part to home equity and subprime loans. The annual report for that year states, “Fiscal 2000 shows a higher margin for home equity and sub-prime loans (which, due in part to their higher cost structure charge a higher price per dollar loaned).” Subprime loans were a key factor in Countrywide’s immense success and rapid growth. However, the company’s reliance on a lending practice that was
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