Poor Angelo Mozilo’s Countrywide Financial Corporation has had to sell everything, including the proverbial kitchen sink, to the Bank of America for $4 billion, $20 billion less than its estimated value only a year earlier. The woes of the nation’s largest subprime mortgage lender have helped destabilize the homeownership futures of millions of families facing foreclosure due to exploding “adjustable rate mortgages;” the stock market which appears to be on a roller coaster ride downward; and the entire U.S. economy which seems to be heading toward a recession primed by the subprime mortgage crisis. And, there’s plenty in the subprime mortgage foreclosure crisis that directly concerns nonprofit organizations.
Groups like the community-based members of the NeighborWorks network which is providing foreclosure counseling assistance to millions of homeowners at risk and national policy advocacy organizations such as the Center for Responsible Lending are crafting solutions that will unfortunately require public sector intervention, making the “bail-out” costs of the S&L scandals of a decade ago look puny.
But Countrywide is a special case. Although Countrywide has (or perhaps, now had) a corporate foundation, the foundation appears to be primarily a conduit for matching donations for Countrywide employees’ charitable contributions. They might be a little less charitably generous if they’re unemployed. This past September, Countrywide said that it was contemplating the elimination of 12,000 jobs, though it is unclear how much of that occurred. Bank acquisitions or mergers typically involve cost cuts and business operation consolidations. No doubt a sizeable part of the cost savings will be in layoffs among Countrywide’s 50,000 employees nationwide.
The bulk of Countrywide’s charitable contributions are direct grants from the corporation. Consequently, disclosure isn’t required. According to the Countrywide website’s information on charitable giving, Countrywide has (or had) a “strategic partnerships” with the Campaign for Home Ownership and the Center for Foreclosure Solutions, both programs of NeighborWorks America. No question that Countrywide’s subprime follies generated plenty of business for the Center for Foreclosure Solutions, keeping the NeighborWorks foreclosure prevention counselors working overtime.
Its “core charity” since 1997 has been Rebuilding Together, known to most people in its original gestation as the “Christmas in April” organization with chapters around the nation that would garner volunteers to fix up the homes of poor people. Reborn in recent years as Rebuilding Together, the organization describes itself as “the nation’s largest all-volunteer home rehabilitation organization” with 240 affiliates. On the Countrywide website, the corporation touted its $10 million in contributions to Rebuilding Together over the years. At Rebuilding Together, a press release in April 2007 announced a grant of $1.8 million for 2007 from “America’s #1 home loan lender.” Let’s hope Countrywide paid up before lurching at a Bank of America billion dollar bailout followed by its bargain basement purchase of the firm.
According to the Countrywide website, the subprime mortgage firm made $8 million in charitable contributions to 120 organizations, presumably on top of $2.3 million it provided as matches to charitable contributions from 4,000 Countrywide employees. But to put Countrywide’s charitable generosity in perspective, the $8 or $10 million given to charity was only a fraction of the $43 million Countrywide paid its CEO, Angelo Mozilo, in 2006 and $48.1 million it paid him in 2007. Those were down years for Mozilo who had earned $57 million in 2005, making him the ninth highest paid CEO in the U.S. that year.
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That salary could have helped keep thousands, tens of thousands of Countrywide mortgagors in their homes, but that is small potatoes compared to what Mozilo makes on the BofA bailout. Countrywide’s proxy statement promises Mozilo a cash severance payment of $88 million plus a retirement package worth $24 million if Countrywide is acquired and Mozilo leaves.[ i ] Those numbers are hard to fathom when compared with the $10 million in Countrywide’s total corporate charitable giving, much less the thousands here and there that could have helped homeowners stave off foreclosures and sheriff’s sales. Mozilo is also guaranteed an annual Countrywide consulting contract of $400,000, free use of the corporation’s jet aircraft, and Countrywide will pay his dues at the Bel-Air Country Club. [ ii]
The announcement of the BofA acquisition bumped up Countrywide shares significantly, but as of January 11th, the share price was still down 82 percent from its 2007 high.[ iii ] Countrywide investors, including nonprofit investors, may have lost their shirts with the plummeting price of Countrywide stock, but not Mozilo. The cagey CEO cashed out stock options worth some $145 million in late 2006 and the first half of 2007, beating the collapse of the Countrywide stock, prompting an inquiry from the Securities and Exchange Commission, with no results reported back yet.
$10 million in charitable contributions in 2006? A pledge of $1.7 million to Rebuilding Tomorrow in 2007? Countrywide’s charitable generosity is a flea speck compared to its much greater generosity to its CEO. Countrywide’s subprime lending and foreclosure practices will generate profound charitable need in the form of evicted and displaced families, expanding rates of vacancy and abandonment, and subsequent neighborhood deterioration. Even fired Countrywide staff may find themselves becoming supplicants for charitable assistance. But Angelo Mozilo will be OK.
i Frank Ahrens, “Big Payday Awaits Chairman After Countrywide Sale”, Washington Post, January 12, 2008
ii David Scheer and Jesse Westbrook, “Countrywide’s Mozilo May Reap $83 Million in Takeover”, Bloomberg.com, January 11, 2008
iii Kathy M. Kristof, “Compensation; Mozilo Could Reap $115 Million; The Countrywide CEO’s Potential Pay if His Company is Acquired Rankles Critics”, Los Angeles Times, January 11, 2008