Real Estate Blog - COUNTRYWIDE AND MERRILL LYNCH - WHAT A DIFFERENCE A SMILE MAKES

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COUNTRYWIDE AND MERRILL LYNCH - WHAT A DIFFERENCE A SMILE MAKES - IT'S THE GEORGE HAMILTON SYNDROME

COUNTRYWIDE FINANCIAL CORP. - Market Cap. 9.8Billion, 3rd Quarter Loss - $1.2Billion.

MERRILL LYNCH & CO. - Market Cap. $57.23 Billion, 3rd Quarter Loss - $2.24Billion.

Angelo Mozila, Chairman of the Board and Chief Executive Officer of Countrywidehas been seen around town, smiling broadly, granting interviews to the Financial TV network shows, projecting a profitable 4th quarter and profitability in 2008.

Stan O'Neal, Chairman of the Board and Chief Executive Officer of Merrill Lynch & Co. has kept a low profile with speculation rampant about his immanent resignation.

Countrywidehas been accused of contributing to the troubles in the mortgage markets by putting Americans into mortgages that they could not afford.

Merrill, in recent weeks has faced mounting criticism after it misjudged the severity of the subprime-mortgage crisis by collateralized debt obligations. The bank still has $15.2 billion of exposure to CDOs.

Oh! What a tangled web they wove. Countrywide, the nation's largest mortgage company originated loans to folks who did not have the ability to pay them back. Then sold the loans to Merrill and others who packaged the collateralized debts and sold them as securities to hedge funds and others.

The news is full of the soon departure of Stan O'Neal.
There is nothing in the news about Angelo Mozila.
Poor Stan. He doesn't have the George Hamilton smile

George Hamilton Smile

UPDATE: Stan O'Neal just announced his announcement. Apparently he and ML came to an agreement for his retirement, rumored to be about $165,000,000.

I believe that Stan O'Neal made blunders that caused his resignation. He made a decision to market those CDOs. He made the wrong call and he'll pay, but he won't be poor. He lost prestige, but not a lot of money.

I also believe he tried to cut a deal with Wichovia to benefit himself. He's gone, but not forgotten.

Mozila, on the other hand is selling stock hand over fist because he thinks he can. The SEC may get him. I don't know. They're pretty good, but slow, very slow. At this time, they just have an "informal inquiry". If they raise the level to an "investigation" and start issuing subpoenas, if they haven't already, we'll know that he's in real trouble.

It'll be interesting to watch this play out. There's no question that Countrywide steered consumers in to bad loans because they were more profitable for Countrywide. But, that's not what the SEC is looking at. They may be looking at fraudulent fianncials, Sarbanes Oxley will look at what Mozila attested to in the financials. Finally, they'll be looking for "insider trading".

Courtesy: Homefinders.com, Broker, Lenn Harley, Serving home buyers in Maryland and Northern Virginia

mortgage mess

Posted by Lenn Harley, Real Estate Broker, Maryland & Virginia on 10/29/2007 02:21 PM

Comments (22)

mortgage mess

22 Comments on COUNTRYWIDE AND MERRILL LYNCH - WHAT A DIFFERENCE A SMILE MAKES - IT'S THE GEORGE HAMILTON SYNDROME

OCT

2007

He probably doesn't have the tan either...

It will be interesting over the next couple of months won't it?

Angelo Mozilo, not Mazola. Freudian slip?

Well, Bank of America closed a division last week that previously worked with mortgage brokers, affecting employees in California, Texas and Virginia. Wells Fargo stopped making subprime loans through mortgage brokers but still offers them directly to consumers through its retail division. I suspect this is simply the tip of the iceberg concerning mortgage institutions.

Mozilo is an interesting bird. Don't know him, but it appears that way on the surface. Too much exposure for me right now for me to feel comfortable with their direction.

Kris. I believe it will get a lot worse. The media and Congress are focused on actions that aren't going to help our market.

David. Could be. Fixed. Thanks.

Elizabeth. I believe you are right on target.

Larry. But, but, but, good old Angelo said profitibility will return next quarter. I read it myself.

Lenn,

Why don't they handle this 'mortgage mess' like an automobile recall. Let the companies assess the damage, then set about correcting the problem. No Problem! Thanks, Fran

Fran. That works for me. Unfortunately, the mortgage companies have little to no liquidity. Some of them couldn't buy lunch.

I heard of one company that was thinking about converting some loans to fixed at the start rate so the home owners wouldn't be faced with a mortgage that was going to reset much higher. Can't remember which one it was.

Lenn, I found it amazing that even though had a huge loss in the third quarter, that just because they projected profitable 4th quarter because of changes to their business model, the Dow shot up on Friday by over 130 points right after that news. I hope their projections are correct, because if they are profitable in the forth quarter, then there is a good possibility that the rest of us will be also.

George. We'll see about that profitable 4th quarter. We'll see.

Lenn,

Great post. Taking on the real issues. I think this is just a layer on a big onion and we're from the center. Or should I just be positive and say "The markets great - it's just the media thats wrong"! Excellent post - just superb!

Mike Lewis

Lenn,

O'Neal was fired today. (see the.street.com) However, the big question is should he leave with millions while Merrill is hemorrhaging. And Merrill could go under as could CW. Angelo's comments do NOT reflect the reality of the situation. After all, it was he who proclaimed earlier this year that he hadn't the slightest clue as to the mortgage mess. And CW did a tremendous amount of sub-prime loans.

So, perhaps, it's smile or cry option.

Eileen. I've been preoccupied updating a web site this afternoon and haven't paid any attention to the news. I'll catch up later.

I understand from earlier reports that O'Neal was secretely trying to negotiate a merger with Wachovia because his employment contract provided for a $250,000,000 bonus if that happened. When the board found out about it, that was the end of O'Neal.

Can't muster up any sympathy. He'll walk away with multimillions. Of course, Merrill have been very profitable during his reign.

Mike. I love the real issues. HARD CORE REAL ESTATE is my style. Thanks for commenting.

Interesting that this area was quite excited about the year end bonuses on wall street to keep sales going- somehow, the bonuses don't seem to correlate with overall performance!

Laurie.

They never did. The bonuses are paid on volume, not on portfolio valuation.

The brokers that do the churning of accounts collect just as much in bonuses as the ones who increase the value of the investors' portfolio.

Stan O'Neal made a monumental blunder by putting ML assets into these mortgage back securities. When Merrill looses over $2 BILLION, he get's to negotiate the terms of his departure.

Lenn, I was shaking my head, a little perplexed by the announcement too. Perhaps, it is the smile or lack thereof...

Nothing surprises me anymore about any of these guys.. There was an article in today's paper about how Countrywide is still sending letters to borrowers who have equity in their that they should refinance with an interest only loan.

cheshire cat

Look like anyone you know?

OCT

2007

Lenn, thank you again for getting out the important information. This is got disaster written all over it. Also, I do not see Countrywide in anyway pulling a profit out of their hat for 4th quarter 2007.

Gary. Notwithstanding Mr. Mozila's rosy predictions, I don't see much in the future for Countrywide.

Joan. That is VERY funny. Thanks.

Kaye. That doesn't surprise me at all. However, I worry more about what the Countrywide loan officer does sitting with a borrower than what they advertise. THAT, IMO is where the trouble really begins.

Lenn - How will poor Stan get by on that stingy $165 million + severance package. Those who thought it ended with Enron are sorely mistaken. I don't think it ends here, either.

Tom.

Read my update following today's news.

Fascinating.

APR

After the murder of our oldest son and the subsequent financial firestorm that ended in us losing our home, AFTER, a plan was worked out with C-wide, I spoke with Mr. Mozilo, PERSONALLY, and the man assured me that although they sold my home illegally, he would personally see to it that we got our home back. Yeah, right! In a pig's eye. They assigned us a supposed inhouse attorney who then in turn immediately sent us an unlawful detainer. I immediately filed suit against C-wide and the UD was rescinded. We asked where to send the pmts and how much until the modification was complete. The attorney told us to hold onto the funds for the initial pmt on the mod, so we did. The mod was introduced in Sep,'08 and was tiered, putting us in a worse situation than we could imagine. Needless to say, we rejected it. Hell, The numbers weren't even consistent from one page to the next. Anyway, They sought a demurer on the complaint citing non-payment, AFTER they told us to hold the payment until the ink was dry on the modification, and it was granted. Now I have to refile. We are tired. This is the end of our American dream. My question is this....and it is for Mr. Mozilo.......were you just blowing me off when you PROMISED my family we would get our home back, that was taken unethically, and illegally from us? Or were you just passing the buck to the mysterious Dan Whitehead? OR......did yo really mean what you said, and this is just some rogue attorney out to put another feather in his cap? Mr Mozilo..........WHY?

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