March 5, 2009 -- When Luis Macedo's home went into foreclosure last year after months of what he called getting the run around from his lenders at Countrywide Financial Corp., he was frustrated and worried.
When he learned Wednesday that some of the same Countrywide executives who oversaw the writing of the bad loans were buying up delinquent mortgages from the government at low prices and then making millions off potential mortgage payments, he was outraged.
"It's absolutely criminal that these guys are still in business," said Macedo, a Dallas native who said Countrywide misled him about how to pay back his loan, foreclosed on his house and forced him to vacate.
"The upper echelon guys perpetrated a fraud because they allowed loans to be written with no oversight. The same way they ban guys from trading on Wall Street, these guys should be banned from the banking and mortgage industry for life," he said. "It's preposterous that these guys are still allowed be in the mortgage business."
Like AIG and Bear Stearns, the name Countrywide -- once the nation's largest mortgage lender -- has become shorthand for a notorious moment in the recession and its logo a veritable symbol of the burst housing bubble.
Now, several former Countrywide executives, including former president Stanford Kurland, 56, have started a company to take advantage of government programs, buying up delinquent mortgages for pennies on the dollar. By collecting what they can from the tenants, the company is making hundreds of millions of dollars even as other businesses continue to crater.
While the new company, PennyMac, insisted that it is providing a public service by buying mortgages from the government and helping homeowners in need, some former Countrywide borrowers became outraged that the individuals they believe , were behind the predatory-lending policies that led to housing bubble are now back in business.
"I am surprised these fat cats are back in business making loans again," said Edward Jordan, an 80-year-old retired postal worker from Brooklyn, N.Y., who claimed he was duped into taking out a loan that quickly grew to unreasonable levels.
'Laughed All the Way to the Bank'
Jordan said the bank from which he first received a mortgage fraudulently claimed he was earning five times more per month than his actual pension of $1,200. For months in 2008, Countrywide, which later bought his mortgage, was unwilling to reconsider the loan until his lawyers stepped in and proved fraud.
"They laughed all the way to bank, and now they're laughing all the way back," said Jordan.
PennyMac, officially the Private National Mortgage Acceptance Co., based in Calabasas, Calif., received hundreds of millions of dollars in capital from private equity giant BlackRock. And Kurland, who received $200 million when he sold his Countrywide stock, reportedly put up some of his own money to found the venture.
The Countrywide brand has in some ways become as toxic as the mortgages it is alleged to have sold.
The name has become so sullied that Bank of America, which purchased Countrywide last year for the bargain price of $4 billion, plans to discontinue the use of the Countrywide name and logo.
PennyMac knows its leaders' former associations with Countrywide present a public relations problem and is doing what it can to avoid talking about it.
"Our company policy is that we don't discuss Countrywide," said Aratha Johnson, PennyMac's spokeswoman. "To assign blame and get involved in details doesn't make sense to anyone. It is just not helpful."
Johnson said PennyMac was reluctant to discuss the old bank not only because of the publicity problem but because of ongoing legal issues facing Countrywide and specific executives at PennyMac, including Kurland.
"Due to ongoing legal actions and cases, we have to be mindful about anything we say positive or negative," she said. "It is simply not in our best interest to discuss [Countrywide]."
Those lawsuits, including one filed by the New York State comptroller, accuse Kurland of pushing the company into offering ballooning loans that started at affordable rates but quickly became unaffordable to borrowers.
A Happy PennyMac Custody
"The Countrywide executives knew exactly what was going on," New York State Sen. Jeffrey Klein said. "They took advantage of homeowners who wanted to take part in the American dream.
"They made the loan process overly complicated to obscure their fraud. Letting these guys run a mortgage company is like letting an alcoholic become a bartender. It just borders on unethical," the Democratic senator said.
Kurland has never been subject to regulatory action, and his lawyers have reportedly said the allegations are without merit and are trying to get the cases thrown out.
PennyMac insisted that its work to buy mortgages from the government is a model for how business can work with government, and that it offers homeowners affordable mortgages when they need them most.
One borrower, Antonio Obando, a union building painter from Queens, N.Y., said his PennyMac loan allowed him to get out from under a toxic mortgage and to keep his family home.
Obando said his monthly mortgage payments were increasing $500 a year and had reached $4,800. His new PennyMac mortgage lowered that rate to $2,175, although that still allows PennyMac to pay off its bargain-basement purchase and start turning a profit on the loan in a few years.
"Now I feel like I can make the payments and fix the house," he said. "I can pay off my credit cards. I can sleep at night."