Dianne O’Neill
Econ. 311
Case Study- Countrywide Financial
September 21, 2013

Countrywide Financial was the largest provider of home loans in the United States by the early 2000’s. It was cofounded by Angelo Mozilo in 1969. Countrywide was the primary provider of home loans to minorities in the US and had lowered the barriers of homeownership for lower income families. In 2003 the company launched a campaign designed to provide $1 trillion in home loans to low income and minority borrowers by 2010. Unfortunately, this campaign didn’t come to fruition. Countrywide Financial was known for providing subprime loans, loans made to borrowers whom would not generally qualify for traditional loans, at a rate higher than the prime rate (market rate). Subprime loans are risky because clients are less likely to be able to pay back the loans. For most of the 2000’s Countrywide Financial created an incredibly lucrative profit in the home loan business, but then the US economy began to slow. People were working more and making less money, the result was a surplus of housing that homeowners could no longer afford. In late 2007, the mortgage crisis peaked with foreclosures skyrocketing, which caused investors and borrowers to feel the ramification of subprime loans. In one year Countrywide Financial depreciated over $20 billion and absorbed over $1 billion in losses. In 2008, Bank of America offered to buy Countrywide Financial for $4 billion. Although the offer was substantially less than the worth of the company, Bank of America was aware and capable of overseeing the debt and ethical investigations that key members of Countrywide Financial were facing. Countrywide Financial was accused of giving out “liar loans”, mortgages that require no proof of borrower’s income or assets. Now many homeowners are struggling, claiming that Countrywide were predatory lenders, and