Is HSBC the investor for your mortgage loan? On Thursday, the SEC accused former Countrywide CEO Angelo Mozilo and two former lieutenants — David Sambol and Eric Sieracki — of fraud, and unveiled emails from the height of the housing boom in which Mr. Mozilo warned of his company’s “toxic” subprime mortgages.
HSBC is involved.
Mozilo knew of the risks Countrywide incurred by originating subprime 80/20 loans and repeatedly questioned the wisdom of continuing to offer the product. Mozilo became concerned about the loans in the first quarter of 2006, when HSBC, a purchaser of Countrywide’s 80/20 loans, began to contractually force Countrywide to “buy back” certain of these loans that HSBC contended were defective.
On March 28, 2006, Mozilo sent an e-mail to Sambol and others, directing them to implement a series of corrective measures to “avoid the errors of both judgment and protocol that have led to the issues that we face today caused by the buybacks mandated by HSBC.”
Mozilo further stated that the 100% loan-to-value (also known as 80/20) subprime product is “the most dangerous product in existence and there can be nothing more toxic and therefore requires that no deviation from guidelines be permitted irrespective of the circumstances.”
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