Catastrophe - Dick Morris [107]
So now some of the same Countrywide folks who benefited the most from the heady days of the precollapse mortgage market are now also benefiting from the traumatic downturn that Countrywide helped to create. Now, that’s chutzpah.
Commenting on PennyMac, New York Times columnist Gail Collins put it best: “It’s like Jeffrey Dahmer selling body parts to a clinic.”359
PennyMac is headed by Stanford L. Kurland, who was president of Countrywide until September 2006. Kurland used to be the number two man at the company, second only to CEO Angelo Mozilo. Kurland is considered to be one of the architects of the creative mortgages at Countrywide. He escaped and sold $200 million worth of stock before the company crashed a few months later. He’s brought along some of his old pals: David M. Walker, the former chief lending officer for Countrywide Bank, a subsidiary of Countrywide Financial, who will be the chief credit officer at PennyMac; Mark P. Suter, the former chief strategy officer for Countrywide Bank, who will be chief portfolio strategy officer at PennyMac; and Michael L. Muir, the former chief financial officer for Countrywide Bank, who will be chief capital markets officer.360
Kurland claims that he left Countrywide before the problems began and had nothing to do with the bad mortgages that destroyed the company. But not everyone agrees with him. As Eric Lipton notes in the New York Times, “lawsuits against Countrywide raise questions about Mr. Kurland’s portrayal of his role. They accuse him of being at the center of a culture shift at Countrywide that started in 2003, as the company popularized a type of loan that often came with low ‘teaser’ interest rates and that, for some, became unaffordable when the low rate expired.”361
The teaser rates at the beginning of a loan were sometimes even below 1 percent for adjustable-rate mortgages. According to a lawsuit filed by California attorney general Jerry Brown, “Countrywide obscured the negative effects—including rising rates, prepayment penalties and negative amortization—which would inevitably result from making minimum payments or trying to refinance. The company misrepresented or hid the fact that borrowers who obtained its home loans—including exploding adjustable rates and negatively amortizing loans—would experience dramatic increases in monthly payments.”362 Many of the defaulted mortgage loans at Countrywide began with those teaser interest rates. When the interest rates suddenly increased dramatically, the home owners were, understandably, in no position to pay.
But that was then, this is now, and the PennyMac folks don’t look back. Instead, they’re aggressively focused on making money on the failed mortgages they own. According to the New York Times, the company has telemarketers working fifteen hours a day trying to speak to the overdue home owners whose mortgages they now own. The results range from a workout to the filing of a foreclosure for those who won’t play ball with them.363 So it’s a good deal for PennyMac either way.
Kurland is highly optimistic about the future profits of his new venture. One of his partners, Jonathon S. Jacobson, a cofounder of Highfields Capital Management, seems to be looking forward to more mortgage losses to scoop us. Sounding rather like a vulture, Johnson told Reuters of the bright