Lifetime Achievement, Indeed

Can it be only nine months ago that American Banker, a trade paper in New York, presented a lifetime achievement award to Angelo R. Mozilo, chief executive of Countrywide Financial?

At the time—last November, when some people still thought the subprime mess would remain a subprime mess—American Banker noted that he had built Countrywide from a start-up to the country's biggest mortgage lender.

Mozilo, of course, did a lot of that empire-building by promoting innovations like no-money-down adjustable-rate mortgages, some with low introductory ''teaser'' interest rates.

They seemed like a good idea at the time. But with home prices falling and interest rates rising, many of his customers now find themselves with crushingly high monthly payments—some even as their houses are now worth less than what they owe on them.

Predictably, defaults are soaring and Countrywide itself is now facing tough times.

Just last week, for example, Countrywide grabbed a life preserver from Bank of America, accepting $2 billion in cash in exchange for preferred convertible shares. They come with an annual interest rate of 7.2 percent and can be converted into common stock at $18 a share—well below Countrywide's current market value.

A week earlier, the mortgage lender pulled down its entire $11.5 billion line of credit to preserve its liquidity as it lost access to increasingly skeptical secondary markets for its mortgages.

Who could have seen it coming before American Banker handed out its lifetime achievement award to Mr. Mozilo at the Pierre Hotel in Manhattan only a week after Thanksgiving?

Well, er, anyone keeping an eye on the mortgage market in the months leading up to the ceremony.

In the second quarter of 2006, after all, foreclosures in California, Countrywide's home state, rose at the fastest pace in 14 years, according to DataQuick.

by Mark Stein