Countrywide

Countrywide Financial Co.

Opportunity/Problem Statement

Countrywide Financial Corporation is a company that was founded in 1969 by Chairman Angelo Mozilo and his partner, David Loeb. When the company was founded, the strategic intent was to create a nationwide mortgage lending firm. The company opened a retail branch in California in 1974 and, by 1980, had 40 offices in eight states. Mozilo and Loeb launched a securities subsidiary in 1981 that specialized in the sale of mortgage-backed securities (MBSs). The company’s annual loan production exceeded $1 billion in 1985 and began to grow at dramatic annual rates on the back of the U.S. housing market bubble which began in 1994 and ended in 2006. The company’s greatest number of annual loan originations had occurred by the time of David Loeb’s death in 2003, with more than 2.5 million mortgage originations that year. Countrywide Financial Corporation originated more than 2.2 million loans totaling $408 billion in 2006. By 2007, the company had 661 branches in 48 states and, in July 2008, was acquired by Bank of America (BoA) for $4 billion in an all-stock transaction. The market value of the company had reached $24 billion in 2006, but fell rapidly in 2007 when it became evident that many of the mortgages Countrywide made during the housing boom were overly risky and likely to go into default.

Alternative Strategy One: Countrywide could have improved its Corporate Social Responsibility.

Analysis 1:

Countrywide’s leadership has been widely criticized for lining its own pockets while the company’s customers and financial performance have suffered. The rapid drop in its share price has illustrated Countrywide’s financial instability. From a high value of $45.26 per share on January 26, 2007, the company’s stock dropped to $6.96 as of January 31, 2008. As a result, its market value has fallen from $26.2 billion to just over $4 billion – an 85% drop. For the third quarter of 2007, Countrywide took roughly...