Countrywide Financial Case Study

Countrywide Financial was well on its way to becoming the nation’s largest mortgage lender when it became one of the nation’s largest business failures in recent decades. “Co-founded in part by Angelo Mozilo in 1969, it had become the largest provider of home loans in the United States within a few decades. By the early 2000s, one in six U.S. loans originated with Countrywide.” (Ferrell, Pg.338) Countrywide’s entire operation including their computer systems, financing arrangements and incentive pay structure was intended to obtain maximum profits out of the mortgage lending upswing no matter how much it cost its primary stakeholders. Their primary stakeholders consist of employees, investors, regulators, clients, communities and shareholders. However due to Countrywide’s ethical and operational issues they caused adverse conditions for all stakeholders involved.

Countrywide’s problems and ethical issues can be traced back to the understanding of concept of subprime mortgage lending. “Subprime lending means lending to borrowers, generally people who would not qualify for traditional loans, at a rate higher than the prime rate (market rate), although how far above depends on factors like credit score, down payment, debt-to-income ratio, and payment delinquencies.” (Ferrell, Pg.339) This leading is risky because clients are ales likely to be able to pay back their loans. Subprime lending has been both a blessing and a burden for the housing industry for many years, which guaranty lenders to make a hefty profit while taking consumers with extreme loan terms and exorbitant interest rates. Throughout the mid 90’s and 2000’s, the number of subprime mortgage loans rose drastically. However, Countrywide failed to realize the needs and consequences of employees, suppliers, regulators, special-interest groups, communities, and media that lead the company to fail and its eventual purchase by the Bank of America Corporation. “When first popularized, the...