SUPREME COURT OF THE STATE OF NEW ... - New York Times

dominance were driving themes . . . . Created huge upside in good times, but challenges
in today’s environment. Net/net it was probably worth it.”
14. Countrywide implemented a matching strategy in which it adopted any lending
practice of its competitors, no matter how liberal—a practice which resulted in Countrywide
offering a dizzying array of toxic loan products. For example:
• In internal e-mails, Mozilo himself characterized Countrywide’s new subprime loan
products as “toxic,” “poison,” and “the most dangerous product in existence.” Mozilo
also observed that there was a “disregard for process [and] compliance with guidelines.”
• A former finance executive at Countrywide explained that: “To the extent more than 5
percent of the [mortgage] market was originating a particular product, any new
alternative mortgage product, then Countrywide would originate it . . . . [I]t’s the
proverbial race to the bottom.”
• John McMurray, Countrywide’s Chief Risk Officer, testified before the SEC that he
agreed that whether Countrywide was “ceding our credit policy to the most aggressive
players in the market” was a “pretty serious concern.”
• In an internal e-mail, Frank Aguilera, a Countrywide Managing Director responsible for
risk management, reported that over 23% of the subprime loans at the time were
generated as exceptions, even taking into account “all guidelines, published and not
published, approved and not yet approved.” Aguilera wrote that “[t]he results speak
toward our inability to adequately impose and monitor controls on production
operations.”
15. Though touting Countrywide’s adherence to underwriting guidelines publicly,
Countrywide senior officers internally admitted that “saleability”—that is, whether Countrywide
could sell the loan on the secondary market, rather than compliance with underwriting
guidelines—became the sole factor governing whether a loan would be approved:
• In his testimony to the SEC, David Sambol, Countrywide Home Loans’ President and
Chief Operating Officer, identified a February 13, 2005 e-mail he wrote that said that
“our pricing philosophy” should be expanded so that “we should be willing to price
virtually any loan that we reasonably believe we can sell/securitize without losing money,
even if other lenders can’t or won’t do the deal.”
• In an internal e-mail, Countrywide’s Executive Vice President of Credit Risk
Management, Christian Ingerslev, asked “should the line in the sand still be ‘unsaleable’?
After looking at the performance, it’s hard to recommend anything other than no.
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