August 26, 2007
From Tiny Gouges, Mighty Chiselers Grow
The summer before I went off to college I sold hugely overpriced vacuum cleaners to poor people who couldn’t afford the payments. My commission was sixty percent.
Presently, however, I accepted common decency as my personal Savior and thus did not wind up like one Angelo R. Mozilo, the loathsome shylock who runs Countrywide Financial Corporation. Read all about his racket here. Excerpts:
According to dozens of loan documents, [Countrywide] routinely charges tax service fees of $60, far above what other lenders charge, for information about any outstanding tax obligations of the borrowers. Credit checks can cost $36 at LandSafe, double what others levy. Some Countrywide loans even included fees of $100 to e-mail documents or $45 to ship them overnight. LandSafe also charges borrowers $26 for flood certifications, for which other companies typically charge $12 to $14, according to sales representatives and brokers familiar with the fees …
Rarely a buyer of Countrywide shares — he has not bought a share since 1987, according to Securities and Exchange Commission filings — [Mozilo] has been a huge seller in recent years. Since the company listed its shares on the New York Stock Exchange in 1984, he has reaped $406 million selling Countrywide stock.
As the subprime mortgage debacle began to unfold this year, Mr. Mozilo’s selling accelerated. Filings show that he made $129 million from stock sales during the last 12 months, or almost one-third of the entire amount he has reaped over the last 23 years.
Posted by Jerome Doolittle at August 26, 2007 03:07 PM
Thanks for the data. It's nice to know that 45% of their loans are jumbo and that close to half of their loans are ARMs that'll be rising. That sounds like there'll be some empty McMansions soon.
A newspaper ad yesterday for a $1.2 million house (a really big price tag around here, although our real estate agents sold 16 million-plus houses last year) advised "special financing arrangements available." I wonder if that'll be through Countrywide.
Is the IRS on the job yet? Not providing 1099s for independent contractors because the company is too busy is a big no-no. But then I thought no-prepayment clauses were a thing of the past and probably illegal.
Was it Kirby? Back in high school (a lot of years ago), I answered a classified ad that said something about "home appliance repair" - and it turned out to be selling Kirbys. I tried it for a week and am proud to report that I sold exactly zero. What a racket!
When those McMansioneers are put out on the street, I understand the government vastly over estimeated the number of trailers they would need for the Katrina disaster. Should make down sizing a lot easier for that crowd.
Seriously though, this thing is going to get pretty nasty before it's over.
I do have one complaint about your post. You have slandered Shylock's name. Even Shakespeare couldn't have dreamed up someone as evil and vile as Angelo Mozilo. (although the picture of him in the Times does seem to look exactly like what I'd imagine that Shylock looked like.)
It was Electrolux, Carl. If memory serves (and it often doesn't), Kirby was even more expensive, and its commissions even more outrageous. At the Electrolux sales meetings, the proudest boast was that you had sold a cleaner to some poor sap who didn't even have a rug. I never reached those heights; like you, I was lousy at the game.
One thing about those vacuum cleaners. They did last for 20 years and longer, unlike the junk one's you buy today, which are made as throwaways. (you could find people selling Kirby and Electrolux on Ebay as recently as a few years ago; 40 year old vacuum cleanrs were still being refurbished and used again.
And I'd bet that the people who built and bought those machines in those forgotten days of yore were paid a decent wage, had healthcare benefits, and got a pension.
If you could buy something of that quality today, it would still be expensive.
And maybe those commisssions seemed high, but I bet it took a lot of work to sell the vacuum cleaners. Your hourly rate probably didn't work out too well unless you were a really good salesman.
But that mortgage money, it just vanishes into the blue sky thin air of high roller bank accounts of people like that Mozilo guy. The consumer is left with nothing to show for it. She can't even clean her house.
So the analogy is not quite up to par in my book. But I understand your guilt.