All the Devils Are Here [17]
That’s when Mozilo met Levine, who today is the president of ARCS Commercial Mortgage Company, a subsidiary of PNC Financial, the big Pittsburgh-based bank. “We were very anxious to be successful,” says Levine. “Angelo in particular. This was our break.”
By the time he graduated from high school, Mozilo had worked in every part of the company, and he continued to work there while attending Fordham. In 1960, the same year Mozilo graduated from college, the company merged with a larger company, United Mortgage Servicing Company, which was based in Virginia and run by a man named David Loeb. Though also from the Bronx, Loeb could not have been more different from Mozilo. “His parents were into ballet and opera,” Mozilo later recalled. “He was fifteen years older, and I was frightened to death of him.” But Loeb took a liking to Mozilo, to his scrappiness and ambition. Mozilo enrolled in night business school at New York University, but dropped out when Loeb decided to send him to Orlando, Florida. He was twenty-three years old.
Brevard County, on the coast not far from Orlando, was the perfect place to be in the housing business in the early 1960s. A few years earlier, the Soviet Union had launched the Sputnik satellite, and the space boom was on in the United States as America frantically tried to outdo its cold war rival. Brevard County included a small speck of land called Cape Canaveral. Space engineers flocked to the area, only to discover there was no place for them to live. As Mozilo would later tell the story to reporters, he remembered seeing people living in tents on the beach.
Mozilo met a group of developers who hoped to build one of the first subdivisions in the county. But they needed money. Mozilo wanted his company to lend them what they needed to build the subdivision, which was a common tactic back then. Loeb agreed, though the tactic was not without risk: the money they loaned to the developers was more than the company was worth.
Disaster struck. On the night before the grand opening, a huge storm swept through the area. When Mozilo arrived at the site, he’d later say, he saw furniture standing in water because the subdivision had been built in a basin. His heart sank. Yet it turned out not to matter: people were so desperate for homes that the subdivision sold out anyway.
In 1968, United Mortgage Servicing was bought out. Loeb and Mozilo left to start their own business. Mozilo was thirty years old, but he had already had sixteen years of experience in the industry. What was striking about this new venture was the sheer, naked ambition of it. Nonbank mortgage brokers had existed for a long time, but they were small and local, niche players at best. Mozilo and Loeb had no intention of being niche players. They were going to be big and they were going to be everywhere. The name of the company said it all: Countrywide.
They struggled at first. Since Countrywide wasn’t a bank and couldn’t gather deposits, the only way it could make loans was by getting a line of credit—called a warehouse line—from a bank or a Wall Street firm or a group of investors. Then, to replenish its capital, it had to sell the mortgages it originated. But since the securitization market didn’t exist yet, that meant they were largely limited to loans that could be insured by the Federal Housing Administration or Veterans Affairs, since those were the only loans Fannie and Freddie were allowed to buy. It wasn’t much of a business.
Loeb and Mozilo tried to raise money by selling stock on the New York Stock Exchange. They hoped to raise $3 million, but got only $450,000, according to Paul Muolo and Mathew Padilla in Chain of Blame. Things got so bad, Mozilo later told reporters, that he and Loeb had to lay everyone off and start again.
But even as they were holding