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Countrywide Financial Crisis

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Countrywide Financial, co-founded in 1969 by Angelo Mozilo and David Loeb became the largest provider of home loans in the U.S., where one out of every six loans originated with Countrywide (Olster, 2010). Countrywide found its niche providing loans to minorities, those with less than stellar credit, and by issuing loans to low income families. Numerous families, unable to achieve the American dream, had the capability of becoming home owners, because Countrywide diminished the barriers preventing this group from obtaining home ownership (Ferrell, Fraedrich, & Ferrell, 2013). “House America” and “We House America” were two programs created at Countrywide to assist low-income and minority individuals with home ownership by offering lower …show more content…

market began to slow and consumers began to spend less of their disposable income. Contractors continued building homes and Countrywide continued loaning money (Ferrell, et al, 2013). Accordingly, many homes were on the market for sale with a decreased number of buyers. By late 2007 and early 2008, foreclosure rates were rising and borrowers and investors were dealing with the aftermath of high-risk loans (Ferrell, et al, 2013). New homes sat vacant with no buyers in sighy, homeowners were unable to continue paying, some in part due to increased payments accrued from variable interest rates, and banks were feeling the strain. By 2008, Countrywide accrued over $8 billion in subprime loans with seven percent delinquent, while the industry average was nearly five percent deliquent (Ferrell, et al, 2013). By this time, Countrywide was facing a serious trouble. In an effort to assist homeowners facing foreclosure, Countrywide created Countrywide Comprehensive Home Preservation, which enabled consumers’ with the opportunity to refinance or modify adjustable rate loans for a lower interest rate or a fixed rate (Ferrell, et al, 2013). Although, the program was created in an honest effort to help, the damage had already occurred. Unfortunately, the program was too late as the government was now questioning the lending practices at Countrywide (Ferrell, et al, …show more content…

Bank of America, under the impression they had made an excellent business decision was unaware of the totality involving Countrywide’s loan practices. Only a small group of Bank of America’s employees were involved in the assessment of Countrywide’s books and operations techniques, yet had no input in the acquisition (Rothacker, 2014). Only a matter of time, Bank of America would realize the magnitude of legal issues it had acquired from Countrywide. However, Bank of America, which was much larger, had the ability to manage the negative media and confront the rising legal troubles better than Countrywide. Ironically, in 2001, Bank of America discontinued subprime mortgages and higher priced loans to riskier consumers (Rothacker,

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