Happy Scribe Logo


Proofread by 0 readers

Friends, Lauren, here each week you hear me tell you a story of business failure, but I don't do it alone. I'm one of three folks working on spectacular failures, spending significant time making a factual and fascinating show. And it takes a lot of effort and resources, truly. And we want to know that you're with us as a nonprofit show. Donations are a super important part of our budget. The average person gives about 45 dollars. Join them or give as generously as you're able.


And since it's election season and all your donation today is a vote for another season of spectacular failures. So cast your vote at Spectacular Failures. Dogtown eight. Thanks. On a August weekday, I asked my friend Claire to meet me at the zoo.


Hi, how are you? If you come in the middle of a goddamn pandemic, you show up in front of a tiger cage. But we're going to have fun our way.


I mean, it was 300 degrees, a thousand percent humidity and my face mask felt like it was suffocating me. So fun. Oh, I don't know. Debatable, but I had an important mission. Claire was going to teach me about predators. Claire or Dr. Fassler to you is an ecologist formerly of Georgetown University, soon to be of the Smithsonian. So she knows some stuff. We started in front of the Great Cat's enclosure, Paval, one of the Smithsonian National Zoo's tigers, was cruising around scratching his behind on some bushes and doing a bit of vocalizing.


Scattered throughout the enclosure were enormous raw animal bones picked clean by the giant kitty. Oh, so you don't know this like they serve up carcasses, they throw carcasses in there because that is how predators.


Yeah, you can't exactly give a fierce jungle cat 100 pounds of whiskies and call it a day. They're predators. They need to, like, shred a carcass. It's good for their teeth. It's good for their muscles. It's good for their coordination. Like the process of ripping apart carcass is like good for the animal. The rest of the zoo's tigers as well as the lions weren't out and about, which I think is extremely rude of them. Claires two year old Remi was stunned into silence by the snub.


Irem, what is the lion say?


Can you do it?


See, she's totally over it anyway. Given the lions and tigers general impudence we moseyed over towards the cheetahs. OK, so. Yeah, OK. Give me a definition of a private you know, the federal definition in like college textbooks is an organism that kills and eats other organisms referred to as its prey. That's it. So it's a basic definition. Yeah. But within that very complicated or at least there are multiple layers of like how they do it.


Yeah, there's a lot of ways to be a predator.


Indeed there are like you can be a creepy stalker predator like an alligator or you can be a broad pack predator like a wolf or you can be an ambush predator where you essentially kind of just like sit and you have super awesome camouflage and you just kind of go kind of nowhere, like a pit viper or our friends, the cheetahs who are way more polite than those great cats.


Can we want to know the reality about predators like sharks and hyenas and Abyssinian ground horn bills? Sure you do. They got nothing on us. Humans are predators.


We are the ultimate predator. We predate and all sorts of crazy ways.


Predators makes it look one. That one, you know, they're a one trick pony. We found a million ways to prey on things. That's human.


It's true. Humans are extremely creative and resourceful predators, but not just in the obvious ways. Hunting with guns, fishing with nets, raising farm animals for slaughter. Some humans use pens and paper and adjustable rate mortgages to feed themselves. Also forgery, fraud and racially biased lending, which are exactly the types of predation that occurred in the run up to the 2008 housing collapse. That was when millions of homeowners fell into the trap of predatory lending, signing their names on one garbage mortgage after the next.


And in that world, there was no greater beast of prey than the mortgage giant Countrywide Financial Corporation and the animal kingdom Countrywide would be considered the ultimate apex predator. But in 2008, it went extinct. I'm Lauren over and from American Public Media. This is spectacular failures, a show that would never foreclose on failure.


Angelo Mozilo was early years, were quintessential immigrant New York. He was born in the Bronx in 1938 to Italian immigrant parents. His father was a butcher and while it was a respectable profession, it was also grueling and it never gave the family any financial stability. Mozilo couldn't see himself elbow deep and awful for the rest of his life. So at 14, he got a job as a messenger for a small mortgage company in Manhattan. He worked there for years doing any job that was needed in order to put himself through college.


Eventually, Mozilo graduated from Fordham University in the Bronx, but he always had a chip on his shoulder because he went to Fordham, not to an Ivy League university, and he couldn't get a job on Wall Street.


That's Bethany McLean. She's the co-author of All the Devils are Here The Hidden History of the Financial Crisis.


He grew up in the era where Italian Americans work and to get hired at the white shoe investment banks. So we had this sense that people were looking down on him and it turned into this almost maniacal obsession with what he called his baby, which was which was Countrywide.


But before we get to Countrywide, there's something important you need to know about Mozilo. He grew up in a rental apartment. His family could never afford their own home on his father's butcher salary. And that was a motivator for young Mozilo.


He was a true believer in homeownership as the key to a better society, the key to wealth for a lot of people. Really the key to life.


After college, Mozilo worked for a guy named David Loeb who ran a mortgage servicing outfit in 1968. The company was bought out and the pair left to start their own company, but not some rinky dink local mortgage servicer. They wanted to be coast to coast mortgage brokers. They called their company Countrywide.


It was really part of this whole idea that, no, it didn't have to be a bank making your mortgage. It could actually be a company that specialized in just making home mortgages because that company in turn could turn around and sell the loans that it had made to investors through this process known as securitization.


Basically, securitization is the practice of pooling debt like a bunch of mortgages, packaging them up nice and pretty, and then selling those packages to investors. If you heard the term mortgage backed securities being tossed around in the late OT's, that's what it means. Phew. Glad we got that out of the way.


At the time the Mozilo and Loeb started Countrywide, this idea of going to a place that wasn't a bank to get a home mortgage was kind of coocoo. People just went to their local bank to help them buy a home. But by the mid 90s, mortgage originators like Countrywide had snatched up more than half the nation's mortgage market. And that's due to some big changes that had taken place. The savings and loan crisis had successfully killed off thousands of their competitors and government sponsored enterprises.


Fannie Mae and Freddie Mac had given nonbank mortgages their tacit seal of approval, which made those mortgages way more attractive for Wall Street investors. You better believe it was about to raise money for these mortgage companies.


Mozilo and Countrywide were the institution that probably took the biggest advantage of the fundamental changes in the way the mortgage system operated 23 years after it got off the ground, Countrywide had become the largest mortgage originator in the country.


It was issuing tens of billions of dollars worth of mortgages a year. The company, co-founded by the son of a Bronx butcher, was now backstroking in cash. But according to this video from a Business Association Award ceremony, Angelo Mozilo satisfaction didn't come from counting dollars.


It came from transforming lives mortgages, especially because they do make such a difference in people's lives. I witnessed that every single day, and I particularly witnessed it when I took loan applications and saw the excitement of people with the opportunity of getting into a home.


So it was all lining up. Countrywide was making the loans, Wall Street was buying them, and millions of new homeowners were able to live their American dream. But then a little wrinkle. Everyone wanted a piece of the action and some fly by night operation started offering people with less than Sterling credit, some very nontraditional home loans. Perhaps you may have heard of them. They were little things called subprime mortgages.


The next question is to talk about the subprime lending meltdown. Who do you think was at fault? The U.S. subprime market grew rapidly in response to this demand.


Subprime loans, loans with high rates and complex terms that often conceal their costs to help those with subprime loans refinance or modify their mortgages.


But, buddy, I can't explain this mess by myself. So our pal Patricia McCoy is going to help. She's a law professor at Boston College and the co-author of the book The Subprime Virus Reckless Credit, Regulatory Failure and Next Steps. Starting in the late 1990s and really taking off in 2002, the lending industry invented this new type of loan. The subprime loan in what subprime refers to are loans to people with lower credit scores, people who may have had some trouble paying one or more of their bills in the past.


Basically before 2002, potential buyers with credit scores of 620 or higher were considered prime borrowers. Anyone with a credit score below that would be hard pressed to get a mortgage. But then all these nonbanks started making more and more exotic loans to riskier and riskier borrowers, which they could do because Wall Street was super into buying those loans and what Wall Street wants, Wall Street gets.


And that meant that there was a lot of money from investors available to make subprime loans.


The best way I can explain prime versus subprime lending is through my own experience because I'm all about me.


A couple of years ago, I, a white woman in my whatever its importance, wanted to buy a little condo and I was able to put the standard 20 percent down. So my realtor hooked me up with a mortgage lender to see what I could afford using a combination of my credit score, which is dope and my income, which is livable. The lender determined how much of a loan I qualified for and the loans were super traditional prime 15 and 30 year fixed rate mortgages, meaning that the interest rate was locked in.


It wouldn't change over the term of the loan. But let's say I had less than DOP credit and I had no ability to put any money down and my income was spotty. My mortgage lender wouldn't touch me with a ten foot pole. I'd be way too risky for their bank to take on because there's a high probability that I default on the loan. So I'd have to go to a mortgage lender that was offering subprime mortgages and those lenders would say, don't worry, we're not going to ask you your income.


We're not going to ask you to document that you have a job. We're not going to ask you for your bank account balances or other assets. So don't worry about that.


We can approve you even though we don't know what your income is or we don't know how low your assets are.


But wait, it gets better. Even if I didn't have employment or money coming in and I didn't own anything of value, I could still get a loan. And those little financial products were called ninja loans.


No income, no job, no assets. And yet the lenders would make these ninja loans. And investors would buy them now to me, stingy tightwad, if a friend asks to borrow a thousand dollars but doesn't have a job or any prospects on the horizon. I'd say there's a high likelihood that I'm not getting my money back. So knowing that's a serious risk, I have to figure out if I feel OK about losing a grand. And likely I do not.


But in the subprime lending market, a person's ability to repay was never really an issue, because once subprime lenders made the loan and tacked on a million different fees, they'd almost immediately sell the loan to Wall Street. So that risky transaction was off their books and on to someone else's. In other words, not my problem anymore. Now there's a heap of subprime loan configurations that mortgage lenders used in the early 2000s to get people without a lot of credit into houses.


And we'll unpack all that shadiness in a minute. But first, it's important to note that our pal Angelo Mozilo wasn't all that into subprime products, at least not when they first hit the scene.


He was actually somewhat of a skeptic of subprime loans for many years and was slow to get into the game of making so-called subprime loans, MacLaine writes in her book.


It was a business, Mozilo groused, that made its money overcharging unsuspecting customers. Most subprime executives were, quote, crooks, he railed to his friends. So how then did Countrywide become the nation's single largest originator of subprime loans? I like to think of it a bit like road cycling. Stay with me.


As performance enhancing pharmaceuticals became more widely available.


A handful of dirty cyclists began using them and they started to win and get rich and famous in order to compete with 30 cyclists getting juiced up blood transfusions, formerly clean cyclists had to get dirty, too. And pretty soon, any cyclist who wanted to compete at the highest levels had to dope because there were never going to be two. Tour de France is one for dopers and one Fernando Burg's. Just as Lance Ghanim.


Oprah, in your opinion, was it humanly possible to win the Tour de France without doping seven times in a row?


Not in my opinion.


It's really interesting because the idea that competition leads to excellence, that competition leads to a race to the top where everybody's trying to be better than the other person. But too often it seems that unbridled competition, particularly in the financial arena, leads actually to this race, to the bottom right, where at least for a period of time, those who continue to engage in good behavior get penalized and those who go to the bottom of the barrel and engage in the worst behavior appear to win.


And so when others went low, so did Countrywide. Stock analysts had begun to get fussy about the fact that Countrywide didn't offer subprime loans and the companies program for low income customers had become a niemiec. High risk borrowers were getting subprime loans elsewhere. So if Mozilo wanted Countrywide to stay on top, he had to get down with subprime.


And that's where Mozilla's aspirations got in the way of his fundamental ethics. By which I mean he'd always had this desire for Countrywide to be the biggest mortgage lender in the country. And if you're going to be the biggest mortgage lender in the country, then you can't let shoddy lenders who are getting away with their bad behavior take away your market share, right?


No, you cannot. You have to employ your own bad behavior.


So Countrywide embraced what it called the supermarket strategy, which meant that if a shady lender down the road was making any kind of loan, Countrywide would offer that same kind of loan. And for a bunch of years, no one cared. You could sell this stuff to Wall Street.


And then Fannie and Freddie began to give in to the pressure and they to loosen their credit standards. And then it was a candy bar. The door, Katie, bar the door.


Indeed, meaning old buddy, it's about to hit the fan and hit the fan. I mean, the entire economy is about to collapse.


We're going to take a quick break. When we come back, what it means to own a home when you've been historically denied the opportunity and what it means to have it taken away. Plus, how a tacky vanity license plate foretold the 2008 housing crisis in just six letters.


We received support from indeed, dotcom, indeed knows that it's a cautious time for businesses across America. There's uncertainty in every decision and every financial commitment is vetted. So your next important hire is more crucial than ever, indeed is here to help. Indeed, Dotcom is the number one job site in the world because indeed gets you the best people fast, unlike other sites, indeed gives you full control and payment flexibility over your hiring pay only for what you need.


You can pause your accountant at any time. And there are no long term contracts with 73 percent of online job seekers visiting. Indeed, each month indeed is going to get you the important hire you need now. So right now, indeed, is offering our listeners a free seventy five dollar credit to boost your job post, which means more quality candidates will see it fast. Try indeed with a free seventy five dollar credit at indeed dotcom slash spectacular. This is their best offer anywhere.


Indeed, dotcom spectacular. We get support from our crowd. Wish you got in early on some of the best performing IPOs of 2019 and 2020. Our crowd investors were and now you can join them in what's next. Our crowd makes startup investing more accessible, doing all the work of finding, investing, promising pre-IPO companies around the globe. Then our crowd brings those venture capital opportunities right to you. By joining as an accredited investor, you can invest in innovative companies disrupting sectors like health care, agriculture and cybersecurity before they go public.


One featured opportunity is tech see a startup helping software technicians and customer service teams remotely see what customers see each year. The experience our crowd team reviews companies and selects a few dozen of the best opportunities to invest in. Through our crowd's platform. Accredited investors gain access to early stage funding rounds so you can invest directly, easily and most importantly, early. Our crowd investors benefited from company's IPO ing like beyond meat or being bought by companies like Intel, Nike, Microsoft and Oracle.


Check out all of the unique investing opportunities our crowd has to offer at our Broadcom spectacular. You can create your free account at Oh You are s.r.o..


W.D. Dotcoms Spectacular Spectacular Failures Received Support from policy genius. September is National Life Insurance Awareness Month. And with everything going on right now, the good news is that it's still easy to shop for life insurance. You can save 1500 dollars or more a year by using policy genius to compare life insurance policies. Policy Genius is an insurance marketplace built and backed by a team of industry experts. It's simple head to policy genius dotcom and in minutes you can work out how much coverage you need and compare quotes from top insurers to find your best price.


Next, apply for your lowest price. The policy genius team will handle all the paperwork and red tape. Policy genius works for you, not the insurance company handling any bumps for you during the application process. So if you need life insurance, head to policy genius dotcom right now to get started, you could save fifteen hundred dollars or more a year by comparing quotes on their marketplace policy genius. When it comes to insurance. It's nice to get it right.


In 1976, Cloyed Miller moved to Rancho Cucamonga, California, with his wife, Maxine. The city is located squarely in the state's Inland Empire, just south of the San Gabriel Mountains and east of Los Angeles. It was named for the Cucamonga people upon whose ancestral lands the city was founded cloyed worked as an educational consultant, and Maxin did the Lord's work serving as vice principal for a junior high school in the area. The couple was solidly middle class, and when it came time to figure out a place to settle, Rancho Cucamonga ticked a lot of their boxes.


Well, I mean, it was inviting just from the standpoint for the opportunity to be able to get a house in an area that was considered affordable and a good neighborhood.


Plus, the city had one other thing going for it. What was it there was appealing about it? Well, getting the opportunity to purchase a home without being redlined, the Millers are black.


And as Claude explains, racist practices such as redlining and restrictive covenants, basically forced segregation, kept the couple out of neighborhoods they otherwise would have been interested in.


We first were looking at some homes in the city next door, but neighbors had influenced the neighbors not to sell to us.


Now, even though we only had a little phone chat, I'm pretty convinced Claude would be a great neighbor. He's a low key dude. He's super friendly and warm and he's a shaman. Plus, he's got amazing style and a magnificent head of long silver locks. I mean, not that cool hair makes you a good neighbor, but whatever cloyed can live next to me any day. In 2005, after years of renting Cloyed and Maxin finally found a house that could be theirs.


No redlining, no crap neighbors, at least not immediately. The home was a four bedroom, three bath, Tudor style meets the desert kind of situation tucked up into a hill overlooking historic Route 66.


Some people say it's like a gingerbread house. In terms of the colorants, try level twenty seven hundred square feet. Sits on a little more than a half acre of land cloyed, and Maxin put an offer on the house 610000 dollars and with a few pen strokes, the house was theirs. They financed it with two mortgages, a fixed rate loan to cover the down payment and to cover the rest, an adjustable rate loan from Countrywide. With their purchase, the Millers were manifesting their American dream.


Murcer Baradaran is a law professor at UC Irvine. She studies the intersection of banking, housing and inequality in the U.S. and she says that homeownership in the U.S. has forever been an indicator of achievement.


I think owning a home has been the American sort of path toward security and community. And, you know, having arrived and, you know, I do think that the norms are changing, but not as much as some would say they've changed.


I mean, I really do still think that owning a home, you know, the largest sort of marker of stability for a lot of people, homeownership isn't just a nice way for people to get a leg up in this country.


It's the way we've chosen to fund communities, own property taxes, pay for our schools and our roads and our emergency services. But it wasn't always like that.


We were not a home owning, mortgage holding nation until the New Deal. The New Deal created the 30 year fixed rate mortgage. It mandated the terms, right. Six percent interest. You know, here's the loan to value ratios, 30 year amortization.


Here's exactly what we're going to do. And then they guaranteed it.


Now, let's not go crazy thinking that homeownership was open to everyone in America. It most assuredly was not seat back in the day in order to pass any sort of progressive housing legislation through Congress, you had to have gone with the wind loving white Southern Democrats on board. And they weren't all that interested in giving black and brown families access to those new government backed mortgages and housing assistance programs from the Federal Housing Administration. So Congress and FDR tossed the interests of the nation's black families right under the bus, denying them a path to generational wealth and community stability.


Essentially, what that meant was no black homeowners could get the FHA guaranteed mortgage, which means that they were cut off from that wealth building asset from the creation of the middle class.


There was no, you know, middle class. The way we see it now, there was no American suburb.


There wasn't just this home ownership society.


And then there was and black communities were left out.


But that's not all over the years, what Americans have devised so many ways to keep people of color out of the housing market and more specifically out of their white neighborhoods, like homeowner associations with oppressive fees and rules and racially restrictive covenants that allowed homeowners to discriminate against any buyers they wanted to exclude, mostly black people, but also Asians, Latinos and Jews, also Irish and Italians. I recently learned of my own neighborhood was once advertised as part of the, quote, largest restricted white community in Washington, DC yeuk.


So it was against that backdrop of historic housing discrimination that Angelo Mozilo and Countrywide Financial Corporation began to take shape as the son of immigrants who are never able to afford their own home. Mozilo was determined to make housing accessible for everyone and to be number one, mostly to be number one. Once he got over his initial squishiness with subprime loans, Countrywide was off to the races.


So if you want to convince yourself that your processes are better than other people and that somehow you're making subprime mortgage loans, yes, but you're only making them to people who are going to pay them back.


You can believe that on some level, lots of folks at Countrywide believe deeply that somehow their subprime loans were better than their competitors. But at the end of the day, it didn't really matter who believed what. All that mattered was that there was an ample supply of borrowers who needed loans and a steady stream of Wall Street investors ready to snatch them up. Michael Winston took an executive job at Countrywide in 2005, the same year that Lloyd Miller bought his first home is mandated.


Countrywide was to make it a more diversified financial services company because Mozilo wanted more for his corporate baby than just mortgage origination.


I was hired by Countrywide.


Help them build Goldman Sachs on the basis of why I Winston had cancer in his throat and talks with the help of an electrolarynx.


They even put a black on my desk saying, Don't ever take your eyes off this Goldman Sachs on the bank. We want to have not just, you know, a real estate or mortgage company. We want to have a global integrated services company. We want to be a one firm firm.


But Countrywide is bread and butter was still home loans specifically of the nonconforming.


Or subprime variety, this became agonizingly clear to Winston one day while walking through the employee parking lot, I saw vanity plated, said Bundanon, and I said, What do you suppose that means? And he said, Oh, it's Angelo Mozilo growth strategy.


And I said, how can fund be opposed? Well, what does that mean?


And he said, Oh, will fund all loans. My response was you'll fund all our loans, whatever. Your guy doesn't have a job. What if these are what attacked, you know, getting it's sitting on this tree. And he said, you don't understand, as long as they can fog a mirror, we'll give them.


Now my dog Ralph could forgive me, but I'm pretty sure that doesn't make him a great candidate for a loan. But what Winston learned early in his tenure was that Countrywide wasn't concerned about the quality of the potential borrowers or the quality of the loans it was generating. It was all about the quantity because for every loan written, Countrywide earned a fee and the loan officer got a commission. The more loans sold, the more money everyone made. They were basically printing money and everyone was happy.


It was clear to me that they shouldn't worry about selling good mortgages, just a lot of them. It seems to me you should focus on the quality of your loans, not the quantity.


In 2006, Countrywide had originated 500 billion dollars worth of loans. Sorry. Let me say that in a more dramatic way, half a trillion dollars worth of loans. The company had become one of the most prominent businesses in America. It was bigger than Nike, Marriott and Pepsi. So why would Countrywide have any interest in changing up its game? They were winning the mortgage Tour de France every year. Plus, homeowners were happy. And why wouldn't they be people who never thought they could get a mortgage suddenly qualified?


And Countrywide made it seem like a breeze.


A growing family with a lot of debt. A young couple with no down payment. A business owner whose income was hard to document. Every one of them was turned down for a home loan by three different lenders. And with Countrywide and I got them all approved. So if you need a lender who actually find ways to make loans, call Countrywide or America's number one home loan lender. No one can do a Countrywide can visit your local one more. You say, oh, all right.


You still have your pay stubs from your college job. Why would they need that? You never know. At Countrywide Home Loans, we put our branch managers in charge of the entire home loan process. I could sure use those statements. Just looking. We have no loan committee. I had just checking in a computer. I think I have everything I need from you. OK, I don't want to rush the loan committee. I am the loan committee for a loan is approved.


Was to Countrywide easy. Really.


If all this seems too good to be true, it's because it was Navales. Brown is the founder and executive director of Herra Housing and Economic Rights Advocates. It's a statewide nonprofit law office in California that deals with issues of economic justice and discrimination. And when she started seeing these subprime loans in the mid aughts, I really just couldn't believe what I was seeing.


The loans just were so inappropriate, dangerous for the people who were in them. The loan term seemed pretty consistently miserable. It was also very different from the loan that I had gotten for my little condo. And I was flabbergasted. See, at first blush, the loans seem great, people who might not otherwise be able to buy a home were getting the keys and moving in with the promise of accruing generational wealth.


But there was a catch. The home loans they'd signed were generational debt machines. It was there in the fine print. Countrywide was putting people into all kinds of nontraditional, predatory financial products loans with adjustable interest rates that would balloon after a few years, piggyback loans or second mortgages on top of first mortgages. And perhaps one of the shadiest moves, says Merissa Baradaran, giving subprime loans to prime borrowers.


And the data shows now that lots of black borrowers went in asking for three year fixed who had the financial capacity like who were capable of the loan to value ratios.


Considering everything you consider for standard mortgage and were up sold these subprime loans.


We know there's lots of predatory behavior among wild animals. We learned that at the zoo. Well, what is predatory mean in this context, Patricia McCoy?


Predatory lending essentially means lending that is designed to extract money and equity in homes out of unsuspecting borrowers without any regard to whether those homeowners can hang on to their homes.


And would you believe that the people who are most often the targets of these predatory loans were black, brown, low income and older homebuyers?


No, lending abuses aren't new.


They've been around since the days of ancient Babylon. But Countrywide predatory schemes were particularly repugnant. They preyed on people who have historically been marginalized when it comes to homeownership in this country.


It was the countrywide wolf bopping around in some sheep's clothing.


These buyers were trying to do the thing that was held from them for so long and trying to, you know, own homes, which is what we tell Americans like this is the American dream. And so as they're grasping for this American dream, they're kind of sold this like, you know, as Martin Luther King said, it was a bad check and it was marked insufficient funds. And that's what they got.


Our pal Cloyed Miller is one of those folks who was given a bad check. Remember, Cloyed was given two mortgages, one from a wholesale mortgage lender and one from Countrywide. And that Countrywide loan was an adjustable rate piggyback loan. Cloyed says he made his payments on time and in full. But about seven months after he and his wife bought their house, they learned it was in foreclosure. Apparently, a clerical snafu channeled both of Cloyd's mortgage payments into one loan.


Instead of separating them out. Cloyed only found out about the foreclosure. When he went back to the bank to get a home equity loan, he planned on doing some renovations. They hadn't given you any notice at all. It was only when you went to the bank you found out.


Yeah, but that's when I found out that I couldn't rectify the situation right now, even though I was still I've been making payments all the way up.


So he found out about the foreclosure in October, not even a year after he bought the house. Four years after a Cloyd's life was one monster battle with Countrywide after another.


It was several months in terms of letters that I had written to Countrywide. And finally, you know, after and then correcting the issue.


I wound up filing for bankruptcy in 2007 and anyone who's been through personal bankruptcy knows it's totally draining.


I went through the whole process of being on time with my payments for the bankruptcy and the game was played that I wasn't on time. I had to constantly send back proof of my payments to the Corps. I was a mess.


Miller tried and failed to get a loan modification from Countrywide for an issue that was Countrywide fault to begin with. In 2008, he testified at a Federal Reserve hearing along with Congresswoman Maxine Waters.


We're not asking them to be irresponsible and to put themselves at some great risk of not being paid. What we're saying is there are many people who, with a little time and attention, can get workouts and modifications to help them stay in the loans.


But Countrywide wasn't budging. It really wasn't in a position to because there were millions of borrowers around the country, just like Cloyed, whose countrywide mortgages had gone south on them. Countrywide was basing its underwriting of the loans on the value of the homes continuing to go up. And when prices started to tumble, all those folks owed more than what their home was worth. Former CNBC Money Honey Maria Bartiromo asked Angelo Mozilo about the. In 2007, at a discussion of the Office of Thrift Supervision, Angelo, give us a status check.


Where are we in this cycle of slowdown for housing?


I don't know. I don't know why I'd pick on me first.


Well, you're the leader.


And he was there was no bigger mortgage broker in the nation than Countrywide.


I think we're dealing clearly with the results and not with the cause. Nobody's addressing the cause. And that's what has to be addressed ultimately. And that's the fact that values of homes continue to go down. And as they go down, the problem gets exacerbated. And until we stop that cycle, we'll continuously dealing with this with this break in the dam.


But like, didn't Mozilla's company share some of the responsibility for turning the housing market into a Vegas gambling racket? And now he's saying that the big problem was that the bubble was about to burst.


So then to look back and say, well, we didn't think just the whole thing is just it's a circular argument.


The worst kind of circular argument around this time, Countrywide exec Michael Winston started to get really suspicious of his employer. Angelo Mozilo was petitioning the board for a massive increase in his compensation. The company had corporate governance and succession issues and people were getting loans for homes they couldn't even remotely afford.


When my secretary comes up and said, you know, the guy who was shining my shoes was sold a mortgage on a 750000 house, what the hell is going on here? You know, it doesn't take a rocket scientist good.


Because we didn't talk to any for this story. It got to a point where Winston had to say something about what he was observing at Countrywide. In a meeting with one of Angelo Mozilo, direct reports, Winston told the guy, Looks to me like you're engaging in massive public fraud.


I must be missing something. Tell me I'm wrong.


I mean, what's the little accusation of massive public fraud between friends? Come on, now.


But apparently that observation was not was not welcomed, though. It was true.


Obviously, Countrywide wasn't going to be like, oh, thank you, Michael, for bringing that to our attention. We'll get right on that. So Winston took his claims to the Securities and Exchange Commission. He was one of a handful of Countrywide employees who officially blew the whistle on the company and its dubious lending practices. Winston's whistleblowing got him sacked and he later sued Countrywide for wrongful termination.


The legal battle lasted years and he says it cost him more than a million dollars. I lost my career.


I lost my speaking career. I lost my voice. It's a total loss.


And not just for Winston. Remember all those people who got adjustable rate mortgages from Countrywide? Well, in 2005, 2006, 2007, those interest rates adjusted without warning borrowers mortgage payments went up by hundreds, even thousands of dollars. And because home prices had taken a tumble, folks were underwater. That led some people to just up and leave their homes. Others were forced out.


In 2008, home foreclosures broke all kinds of records. In the months to come, hundreds of thousands more American families will see their mortgage rates soar, leaving many with no choice but to give up the most valuable asset they've ever owned.


And we know what happened next. Bailout time. Fortunately, the government stepped in and saved underwater homeowners with bad loans. No, no, that's wrong. They helped the predators. JPMorgan Chase was bailed out. Wells Fargo and Capital One and Goldman Sachs were all bailed out. Fannie Mae and Freddie Mac also got some of that sweet bailout cash.


I think most people defrauded were never made whole.


And when I think of the emotional distress that people went through because they were losing everything, they were losing this place where they were raising their kids, they were sometimes losing grandmother's home that they had inherited. They were losing family history, tremendous sense of stigma and personal failure that folks who are foreclosed on still carry with them even when they know that they were.


Essentially set up to fail if there is one speck of solace that can be found in all of this. It's the countrywide, the largest subprime mortgage lender in the U.S. did not get to ride off into the sunset when the mortgage market collapsed. Countrywide was carrying a huge number of mortgages on its books. The company usually shunted most of its mortgages off its ledgers right into the loving arms of investors, but kept some for itself.


So the idea is that if you hold these things that are generating income on your own balance sheet, well, then you have a buffer during times when the mortgage machine is sputtering.


But since so many Countrywide borrowers couldn't pay their mortgages, the company was left holding the bag. Its former beefs on Wall Street wanted nothing to do with them, and bankruptcy loomed. Eventually, Bank of America came to Countrywide Rescue.


In July 2008, the multinational banks snagged the fallen mortgage giant for four point one billion dollars, just a sliver of what the company had been worth at its peak.


Then came the lawsuits. The S.E.C. charge Mozilo in 2009 with insider trading and misleading investors. He settled a year later, writing Uncle Sam a fat cheque for twenty two point five dollars million and Pinki swearing to never serve as the head of a publicly traded company again. But don't worry about Mozilo. He's doing just fine, thanks. Living life in his 12000 square foot country club house in Santa Barbara. Halfway through his daughter, he declined to speak to us for this story.


In 2011, Eric Holder's Justice Department issued a three hundred thirty five million dollars settlement with Bank of America. They were forced to take responsibility for countrywide discriminatory lending practices. Now these allegations represent alarming conduct by one of the largest mortgage lenders in the country during the height of the housing market boom, for example, in 2007, a qualified African-American customer in Los Angeles borrowing two hundred thousand dollars paid an average of roughly twelve hundred dollars more in fees than a similarly qualified white borrower.


Holder's victory hasn't really been any help to keloid. Miller, the retired veteran, has been battling to save his home for 15 years. Once the bank foreclosed on Cloyd's home, Bank of America agreed to sell it back to him. But they offered him another adjustable rate mortgage who had no other options. His credit was shot from filing personal bankruptcy, and he didn't qualify for a fixed rate and things just kept getting worse. Koide was the victim of a foreclosure rescue scam, and he had a serious stroke in 2014.


He's tried for years to get loan modifications from Bank of America, but to no avail. Recently, he and his wife decided they'd had enough. They were going to put their home up for short sale. That's where a distressed homeowner sells the house for less than the amount due on the mortgage.


I would say. The high anxiety and levels of depression. They come with this and the trauma that follows is something that the banks don't compensate you for. In the wake of coronavirus in the rampant unemployment it caused, it's natural to look back at the last worst economic crisis since the Great Depression and wonder what's coming down the pike. 2008 was a grim year for foreclosures in this country, particularly for black and brown communities. The subprime crisis wiped out about 50 percent of the nation's black wealth, and that wealth hasn't been recovered no matter what any politician or president says.


With new foreclosures and evictions looming, the already vast wealth gap stands to widen even further. Sure, Countrywide is out of the picture, and federal regulators have tightened mortgage lending practices, which isn't nothing. But if I've learned anything over the years, it's that if there's money to be made, there's always another creep waiting in the wings for his shot at inglorious greatness. I mean, scammers kind of scam. So the only thing to do is read the fine print.


Spectacular failures as a production of American Public Media. It's written and hosted by me excellent neighbor Lauren Ober. Full time renter Whitney Jones is the show's producer. Our editor is real life homeowner Phyllis Fletcher, basement dweller. David John is our assistant producer. Our theme music is by the delightful David Schulman. Other original music this season comes from Jen Champion and Michael Cormier. Christina Lopez is our audience engagement editor and Lauren Deti is our executive producer concept by Tracy Mumford.


If you want to know more about Bethany McLean, Patricia McCoy and Melissa Barata Ron's excellent books. Check out our website, Spectacular Failure XG. It's got all our great source material. Finally, super thanks to our pal Dr. Claire Baesler and her daughter Remy for joining me at the zoo and being chill when a cheetah marked its territory right in front of our faces. That was truly disgusting.


I think it's pretty cool. I mean, he literally just sprayed Sting. Yeah, but on the tree, on the play does that like every hour on the hour. That's history. Right. Right. That's true. That's like my.


Parens, Lauren, here. Did you know that Spectacular Failures has a newsletter get out? No, we do. Each week will send out behind the scenes extras from episodes, weekly team recommendations for things we love, a sneak preview of upcoming episodes and other fun stuff. You can sign up now at Spectacular Failures Doggie Newsletter.