Florida Mortgage Lenders, Bankers Blame Federal Reserve for Subprime Woes

Angelo Mozilo, the butcher’s son who built Countrywide Financial Corp. into the largest national and Florida mortgage lender in the United States, was in no mood for soul-searching over the subprime home crisis.
Perched on an arm chair on a ballroom stage, Mozilo (pictured), who made $387 million in pay and stock options over the past five years, disavowed blame for the collapse, pleasing his audience of fellow mortgage-banking industry leaders and foot soldiers.

“You’ve got to be careful here about blaming ourselves too much,” the deeply tanned and sharply dressed chairman of Countrywide told the Mortgage Bankers Association this week.

The real culprits, he argued, are the Federal Reserve with its series of interest rate hikes, crooked real estate speculators, falling housing prices and regulators’ attacks on interest-only and other risky subprime loans.

His take contrasts starkly with the view of those who blame loose lending policies and oversight, along with a get-rich-quick culture in the Florida mortgage industry.

The consequences of the housing collapse, however, are not open to debate. Tens of thousands of loans have failed, pushing subprime borrowers out of their dream homes, while numerous economists blame subprime lending woes for a slump in the Florida housing market that could get worse. The downturn is likely to sap overall economic growth for the rest of this year.

Many consumers felt misled by the industry, lured into borrowing at subprime, the loan category for higher credit risk borrowers who pay higher rates.

However, calls for a reappraisal of the industry’s practices have been met by protest. More red tape and bureaucracy would only make things worse, the lenders say, and few expect any major changes to be carried out.

“Regulation … is better for the crooks because only the good people have to comply,” Mozilo said to a reporter before taking the stage. “So I’m against it. In fact, it’s regulators, in my opinion, that have caused part of the problem when they attacked the pay option and interest-only loans.”

Outside the conference hall, there was still plenty of subprime mortgage misery. Over the next several years, more than a million foreclosures could occur when adjustable-rate Florida mortgages reset at higher monthly payments.

Mozilo and Countrywide are still standing while New Century Financial Corp. and dozens of other subprime lenders have gone belly up. Indeed, the industry’s big players are set for a period of expansion.

Countrywide is hiring, picking from the best of the companies that went under, and Mozilo sees a better future for the big players like Countrywide, Wells Fargo & Co. and Citigroup now that the upstarts are gone.

Alan “Ace” Greenberg, chairman of the executive committee at Bear Stearns Cos. Inc., the No. 1 U.S. issuer of mortgage-backed securities, downplayed the impact of subprime lending woes on U.S. capital markets. He said called the last few months a weeding-out process.

“I think the subprime (problem) has been blown completely out of proportion,” Greenberg said