It turns out that Frank Mozilo, head of Countrywide (CFC), was passing out special mortgages to people including two former chiefs of Fannie Mae (FNM). Countrywide did business with the quasi-government operation, so being friendly was a good, perhaps excellent idea.
According to The Wall Street Journal, “These borrowers, known internally as “friends of Angelo” or FoA, include two former CEOs of FNM, the biggest buyer of Countrywide’s mortgages,
It is too early to say whether these discoveries will lead to any sort of government investigation. They certainly look bad.
More important, they raise the issue, once again, of why the management of Bank of America (NYSE:BAC) wants to buy Countrywide? There may be money to be made down the road, but there still could be a lot of troubling revelations between now and then.
Bank of America is trading near a 52-week low now. A lot of big investors don’t like the CFC deal. Perhaps the bank’s stock price will get the message through. There is very little benefit and a lot of potential risk in buying CFC.
Douglas A. McIntyre
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