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SEC Countrywide Deposition of Angelo Mozilo Volume 3

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SEC Countrywide Deposition of Angelo Mozilo Volume 3 Countrywide - Testimony Taken in Investigation MOZILO ANGELO - August 21, 2008 00:00:00 a.m. 390:1 THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION 2 3 In the Matter of: ) 4 ) File No. LA-03370-A 5 COUNTRYWIDE FINANCIAL CORPORATION ) 6 WITNESS: Angelo Mozilo 7 PAGES: 390 through 627 8 PLACE: Securities and Exchange Commission 9 5670 Wilshire Boulevard, 11th Floor 10 Los Angeles, California 90036 11 DATE: Thursday, August 21, 2008 12 13 The above-entitled matter came on for hearing, 14 pursuant to notice, at 9:08 a.m. 15 16 17 18 19 20 21 22 23 24 Diversified Reporting Services, Inc. 25 (202) 467-9200 May 24, 2010 5:20 pm Page 1 SEC_ENF_FCIC_001360 Countrywide - Testimony Taken in Investigation MOZILO ANGELO - August 21, 2008 00:00:00 a.m. 391:1 APPEARANCES: 2 3 On behalf of the Securities and Exchange Commission: 4 SAM S. PUATHASNANON, ESQ. 5 LYNN M. DEAN, ESQ. 6 SPENCER BENDELL, ESQ. 7 Securities and Exchange Commission 8 5670 Wilshire Boulevard, 11th Floor 9 Los Angeles, California 90036 10 (323) 965-2616 11 12 On behalf of the Witness: 13 WILLIAM R. McLUCAS, ESQ. 14 JOSEPH K. BRENNER, ESQ. 15 JOEL S. GREEN, ESQ. 16 Munger, Tolles & Olson, LLP 17 355 South Grand Avenue, 35th Floor 18 Los Angeles, California 90071-1560 19 (213) 683-9571 20 21 22 23 24 25 May 24, 2010 5:20 pm Page 2 SEC_ENF_FCIC_001361 Countrywide - Testimony Taken in Investigation MOZILO ANGELO - August 21, 2008 00:00:00 a.m. 392:1 C O N T E N T S 2 3 WITNESS: EXAMINATION 4 ANGELO MOZILO 394 5 6 EXHIBITS 7 EXHIBITS DESCRIPTION IDENTIFIED 8 536 E-mails, Bates CFC2007B305777 to 305780 424 9 537 Bates CFC2007B010636; 1 page 426 10 538 Bates CFC2007B786614 to 786615; 2 pages 436 11 539 Bates CFC2007A362338; 1 page 448 12 540 Bates CFC2007A373262 to 273263; 2 pages 464 13 541 Bates CFC2007A362791 to 793; 3 pages 470 14 542 E-mails, Bates CFC2007A362867 to 362868 472 15 543 Bates CFC2007A364000; 1 page 480 16 544 E-mail, Bates CFC2007A369279, 2-18-06 510 17 545 Bates CFC2007769495 to 497 511 18 546 E-mail, Bates CFC2007B004968, 3-24-06 515 19 547 E-mail, Bates CFC2007A370003, 3-28-06 522 20 548 E-mail, Bates CFC2007B061477, 4-17-06 531 21 549 E-mail, Bates CFC2007A370236 to 370237 544 22 550 E-mail, Bates CFC2007A371317 to 318, 3-26-06 556 23 551 E-mail, Bates CFC2007A362061 to 063 561 24 552 E-mail, Bates CFC2007A362370, 8-19-06 573 25 553 E-mail, Bates CFC2007C551900 to 903, 9-8-06 578 May 24, 2010 5:20 pm Page 3 SEC_ENF_FCIC_001362 Countrywide - Testimony Taken in Investigation MOZILO ANGELO - August 21, 2008 00:00:00 a.m. 393:1 EXHIBITS (Continued) 2 EXHIBITS DESCRIPTION IDENTIFIED 3 554 E-mail, Bates CFC2007A363449 to 450, 2 pages 585 4 555 E-mail, Bates CFC2007B668917 to 920; 4 pages 593 5 556 E-mail, Bates CFC2007A364591 to 592; 2 pages 604 6 557 E-mail, Bates CFC2007A373214 to 219; 2-27-07 605 7 8 PREVIOUSLY MARKED EXHIBITS 9 EXHIBITS DESCRIPTION IDENTIFIED 10 45 E-mails, Bates CFC2007B277227 to 277232 395 11 59 E-mail, Bates CFC2007B011868 to 869 488 12 200 E-mail Bates JPM000969 to 976 491 13 214 E-mail dated June 1, 2006 483 14 216 E-mail, Bates CFC2007A473297 to 298 560 15 226 E-mail, dated 9-7-07 Bates JPM000313 to 316 486 16 277 Bates CFC2007829058 to 067, 12-7-06 609 17 524 Subpoena 394 18 19 20 21 22 23 24 25 May 24, 2010 5:20 pm Page 4 SEC_ENF_FCIC_001363 Countrywide - Testimony Taken in Investigation MOZILO ANGELO - August 21, 2008 00:00:00 a.m. 394:1 P R O C E E D I N G S 2 MR. PUATHASNANON: Let's go on the record at 9:08, 3 August 21st, 2008. 4 Whereupon, 5 ANGELO MOZILO 6 was called as a witness and, having been first duly sworn, 7 was examined and testified as follows: 8 EXAMINATION 9 BY MR. PUATHASNANON: 10 Q Good morning, Mr. Mozilo. As you know, I am Sam 11 Puathasnanon. This is Lynn Dean and Spencer Bendell, and we 12 are officers of the Commission for the purposes of this 13 proceeding. We are today resuming the examination of Angelo 14 Mozilo, which was adjourned yesterday, August 20th, 2008. 15 Would counsel please identify themselves. 16 MR. McLUCAS: Bill McLucas, from WilmerHale. 17 MR. BRENNER: Joseph Brenner, from WilmerHale. 18 MR. GREEN: Joel Green, from WilmerHale. 19 BY MR. PUATHASNANON: 20 Q Testimony today is pursuant to a Commission 21 subpoena, which has previously been marked as Exhibit No. 22 524. 23 (SEC Exhibit 524 was referred to.) 24 BY MS. DEAN: 25 Q Mr. Mozilo, do you understand that you remain under May 24, 2010 5:20 pm Page 5 SEC_ENF_FCIC_001364 Countrywide - Testimony Taken in Investigation MOZILO ANGELO - August 21, 2008 00:00:00 a.m. 395:1 oath? 2 A I do. 3 Q I hand you what's been marked as Government Exhibit 4 45. It's a series of e-mails Bates-numbered CFC 2007B, as in 5 boy, 277227 through 277232. 6 (SEC Exhibit 45 was referred 7 to.) 8 BY MR. PUATHASNANON: 9 Q Take your time reviewing the document, and when 10 you're ready, please let me know, Mr. Mozilo. 11 A Okay. 12 Q First of all, Mr. Mozilo, what is a flash report? 13 A It's a -- I believe a monthly record of 14 delinquencies -- delinquency trends. 15 Q Did you regularly receive flash reports? 16 A I did. 17 Q And that would be for the different products 18 offered by Countrywide? 19 A As I recall, the flash report included all 20 products. 21 Q Turning your attention to the third page of the 22 document, which includes an e-mail from you to Mr. Bailey on 23 July 10th, 2006. 24 A Yes. 25 Q Yesterday, if I remember correctly, you mentioned May 24, 2010 5:20 pm Page 6 SEC_ENF_FCIC_001365 Countrywide - Testimony Taken in Investigation MOZILO ANGELO - August 21, 2008 00:00:00 a.m. 396:1 that the area of primary concern with respect to pay-option 2 ARMs was the percentage of people making the minimum payment; 3 is that correct? 4 A The increasing number, right. 5 Q Okay. Here, your focus seems to be, now, on the 6 delinquency; is that correct? 7 A My focus in this memo is that, yeah. 8 Q What was it about the higher delinquency that 9 caused you to raise the issue with others in this context 10 here in July -- in June -- sorry, in July 2006? 11 A I'd be concerned about any product, individually or 12 collectively, when delinquencies are rising. Rising 13 delinquencies could portend a future loss for the company. 14 And so it was not uncommon for me to be focused on 15 delinquencies of all products, whether it be pay options or 16 hybrids or HELOCs or any of those products. 17 Q And so what you're focused here on is the fact that 18 the delinquency rate as to pay options was going up? 19 A That's what the flash report, I believe, indicated. 20 Q Okay. Was there any other aspect of the 21 delinquency numbers in this flash report that was a cause of 22 concern for you? 23 A I don't recall whether there was anything else that 24 was a concern. I happened to be focused on this particular 25 issue. And that's why I raised the issue. May 24, 2010 5:20 pm Page 7 SEC_ENF_FCIC_001366 Countrywide - Testimony Taken in Investigation MOZILO ANGELO - August 21, 2008 00:00:00 a.m. 397:1 Q And then in the first sentence, you mentioned 2 standard book of business. Are you referring to all the 3 company's loans as a group, or are you referring to some 4 subset? 5 A Where is that? 6 Q Sorry. It's the second line of the e-mail. It's 7 the end of the first sentence. 8 A This is on -- okay. I'm sorry. Yeah, our standard 9 book of business. It's talking about all of our book of 10 business. 11 Q So the delinquency rate in the company generally? 12 A Well, I would say that probably I'd have to -- you 13 know, my -- probably my thought at that time was the first 14 mortgage business. I was focused on the -- the -- all of the 15 first mortgage business, which all had -- I mean, aside from 16 the 30-years fixed, all had a payment shock component, any 17 variable rate was much worse than the pay option, because it 18 was happening every year, versus way out in the outer years, 19 but I would say the standard book was -- would be everything 20 but the second mortgages. 21 Q And did you have a sense as to what the delinquency 22 rate on the standard book of business was at this time? 23 A I think I was looking at the flash report, and it 24 indicated -- but I was primarily focused on the trend of the 25 pay options. May 24, 2010 5:20 pm Page 8 SEC_ENF_FCIC_001367 Countrywide - Testimony Taken in Investigation MOZILO ANGELO - August 21, 2008 00:00:00 a.m. 398:1 Q In the second part of that e-mail, you focus -- 2 well, you talk about the low payment requirements of a 3 negative am loan.
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