KEY E-MAILS FROM THE FCIC FINANCIAL CRISIS INVESTIGATION

September 9, 2004

E-mail from Countrywide Financial chairman of the board and chief executive officer Angelo Mozilo to Stan Kurland and Keith McLaughlin, subject: Subprime Residuals.

Angelo Mozilo

Angelo R. Mozilo was Countrywide Financial'S chairman of the board and CEO until July 1, 2008. Portfoio magazine placed Mozillo at number two in its list of "Portfolio's Worst American CEOs of All Time," between number 1, Dick Fuld of Lehman Brothers and number 3, Ken Lay of Enron. According to the Wall Street Journal Mozilo's received total compensation, including salary, bonuses, options and restricted stock, of $470 million between 2001 and 2006. On June 4, 2009, the SEC charged Mozilo with insider trading and securities fraud. Mozilo was accused of selling millions of dollars in stock he personally owned. Mozilo settled with the SEC, accepting a fine of $67.5 million. Mozilo’s financial penalty was the largest ever paid by a public company's senior executive in an SEC settlement.


Stanford Kurland

Stanford L. Kurland, was Countrywide’s president before leaving the company in 2006. In 2008 he became the founder, chairman and chief executive officer of PennyMac. PennyMac buys delinquent home mortgages that the government took over from other failed banks. Under the initial terms of the FDIC, PennyMac is entitled to keep 20 cents on every dollar it can collect, with the government receiving the rest. Eventually PennyMac ‘s cut will rise to 40 cents.



Keith McLaughlin

Thomas K. "Keith" McLaughlin, who had served as Countrywide's CFO from 2001 to 2005, when he left the company to "focus on personal interests." McLaughlin announced in March 2010, that he would run for election to become treasurer of Ventura County, California. In the election held on June 8th, 2010, McLaughlin came in fifth in the vote count.


 

Text from body of E-Mail

As I look at production trends, not only at Countrywide but also with other lenders, there is a clear
deterioration in the credit quality of loans being originated over the past several years. In addition, from my
point of view, the trend is getting worse as the competition for sub prime, Alt-A and nonconforming in general
continues to accelerate. GE, Ameriquest and others, excluding Wells, Chase and BofA, have not only
become more price competitive but have substantially lowered credit, down payment and income
requirements. This trend could cause borrowers to be more vulnerable to adverse changes in interest rates,
the economy or both. It appears that home buyers, driven by a strong desire to own a home combined with
rapidly increasing values, are stretching themselves beyond any historical standards to get into the home of
their dreams. The bottom line of my perspective on this trend is that we should seriously consider securitizing
and selling (NIMS) a substantial portion of our current and future sub prime residuals even though the value in
retaining such residuals "appears" to be a better economic execution than a NIMS execution.

I fully understand that our residuals have been modeled on a conservative basis but it is only conservative
based upon historical performances. But the type of loans currently being originated combined with the
unprecedented stretching of all aspects of credit standards could cause a bump in the road that could bring
with it catastrophic consequences. If that were to happen then the .50 basis points additional cost of a NIM
versus retention on our balance sheet would look like a bargain.

I must admit that the upcoming election has exacerbated my concerns in that a Kerry win could cause a
serious disruption in the economy if he is successful in rolling back a substantial portion of the tax breaks
initiated by Bush. It is the wage earners $200,000 and over that are the drivers of the economy and that is
the group that Kerry has stated that he will attack. This could clearly cause a major bump in the road.
As you know I have no political bias but I would be concerned about any candidate that proposes a massive
wealth transfer from the people to the federal government.

I would like you to consider my concerns and let me know your thoughts.