OK, now some people are going overboard. But damn it's funny. Here's Countrywide's "Mozilo Monster" youtube video

Anyone want to guess when Countrywide announces the mass layoff and a hundreds-of-millions of dollars "mark to market" balance sheet markdown?

Orangelo has dumped enough shares, and the cat's out of the bag, so now he's gotta be thinking Sarbanes Oxley, and staying out of jail.

So here comes the huge layoff (20,000?), office closures, and shocking cancer loan portfolio markdown (mark to market CFC auditors? anyone minding the store?)

I've got a feeling the news could be soon, real soon... and yes, I own CFC puts. Do you?

Here's Countrywide Mortgage's Angelo Mozilo trying to defend why he sold $118 million in CFC stock before his company crashed

It's funny reading this on the same day that Qwest's former CEO Joe Nacchio was sentenced to six years in Federal prison and $52 million for insider trading and pumping up his numbers while he bailed out. Deja vu all over again? Hey, nobody saw it coming, right Angelo?

And for a CEO to be desperately selling as the company he runs is doing stock buybacks to prop up the price, man, that stinks to high heaven.

Ronald Redfield - Redfield, Blonsky & Co.: Were there any buybacks during the quarter? Do you find, Angelo, with all respect, you selling a material amount of shares into buybacks? You previously mentioned you own 10 million shares. How many shares do you currently own, not including options?

Angelo Mozilo: I don't know the answer to that question. I own -- including options, I think around -- I think it is around 11, 12 million, something like that. The sales of the stock had nothing to do with buybacks because that 10b5-1 agreement was made well over a year ago.

Ronald Redfield - Redfield, Blonsky & Co.: No, the legality is fine, but one can think that perhaps the price is being held up the buybacks creating a demand.

Angelo Mozilo: Yes, well, if you think like that it's -- I don't think like that. The buybacks were done because we thought it was in the best interest of shareholders. I have -- as somebody pointed out, I'm 68 years old, I own a lot of shares, and I have 10b5-1 that is in process right now. That is selling into this market when the buybacks are not holding it up.

So it is an independent issue that is not relevant to buybacks or not buybacks. It is a personal situation that I'm selling into a market no matter where the price of the stock is.

Angelo Mozilo: Okay, some final comments. One to the individual who asked about my sale of stock. The decision to buy back stock is a collective decision, really emanates from the financial operations of the Company as to what is the best return for the investment of the shareholders, invested capital for the shareholders. So it is totally unrelated to any of my issues relative to the sale of stock.

Secondly, as I said, I don't know the exact amount of shares that I have. But the shares that I have, actual stock I have, I have retained for 39 and a half years. Not sold a share of the initial stock that I got when Dave and I started this Company that I got, that I purchased.
The only thing that is being sold under the 10b5-1 are options with expiration dates.

Alt-A / "Liar's Loan" mortgage king IndyMac's newest spin - "It's all good - we suck only just as bad as Countrywide"!!!

I think this would be like WorldCom saying that everything was OK because Enron was in a similar boat. Or buggy whip Company A saying all would be fine because they were tracking nicely against buggy whip Company B.

These guys really are amazing.

Yes, I'm short IndyMac via put options. I figure one day this company will have to stop with the spin and report the truth - but my guess is that it'll be the public auditors or Feds who come clean first, not IndyMac, their CEO or their PR flak Grove Nichols. What they don't mention in this posting are three very very important words, the 800 pound guerrilla in the room:

MARK TO MARKET

Here's just some of IndyMac's latest spin:

Update on Delinquencies in Our Mortgage Loan Servicing Portfolio
July 20th, 2007

In line with our expectations and as we communicated last quarter, delinquencies in our $184 billion servicing portfolio increased in the second quarter of 2007. As the following table illustrates, 30+ day delinquencies for our servicing portfolio in the second quarter of 2007 were 5.35 percent, up from 4.10 percent a year ago and 4.37 percent last quarter. Foreclosures also increased to 1.15 percent in the second quarter, up from 0.89 percent in the prior quarter.

While our delinquency rates have increased, they are comparable to Countrywide Financial Corp., which was ranked by the National Mortgage News as the No. 1 residential mortgage originator and the No. 2 residential servicer in the U.S. for the first quarter of 2007. On July 16, 2007, Countrywide reported a 30+ day delinquency rate in their servicing portfolio of 4.77 percent for the period ending June 30, 2007. Indymac’s modestly higher delinquency rate can be attributed to the fact that Countrywide carries a much higher mix of agency/conforming loans in their servicing portfolio relative to Indymac.

Grove Nichols
Communications Director

Enron, Worldcom, Liar's Loans, Ratings Agencies and Whistling Past the Graveyard

And the funniest thing is that it was all so damn obvious. Well, at least to some...

"So far, the stock market keeps whistling past the graveyard," said Matt Smith, president and portfolio manager at Smith Affiliated Capital. "But these issues continue to get worse, and eventually they'll impact [mergers and acquisitions] and private-equity activity, which have been the foundations of the stock market."

Until now, the pricing of risks linked to housing and subprime mortgages remained something of a mystery, as risks remained hidden in the complex world of credit derivatives. But changes in ratings will force a re-pricing of the roughly $800 billion in subprime-mortgage bonds sitting in investment portfolios across the globe.

"Whenever you have such a massive growth in derivatives, as we had with housing, it's [used] to hide the losses," said Smith of Smith Affiliated Capital. "Nobody knows the true counterparty risks."

Some market players believe that, with the rating agencies making their moves so late in the game, they're seeing a replay of the Enron and WorldCom debacles, which played significant parts in popping the 1990s stock-market bubble.

The rating agencies, then as now, have come under fire for changing their ratings only after the bad news was already out.

"The credit agencies are always lagging," said Smith Affiliated Capital's Matt Smith. "But the main difference between now and 2000 is that you could sell stocks quickly; for the real-estate market, it takes three or four years to unfold."

Both Enron and WorldCom had used "creative" accounting methods to artificially boost earnings, until the bursting of the stock bubble revealed their overwhelming debt was more real than much of their projected revenue. Yet the main credit-rating agencies had kept an investment-grade rating on both companies' debt until days before they went bankrupt.

In particular, so-called liar loans, or mortgages that were backed by dubious documentation -- if any -- from borrowers, still ended up receiving high-grade ratings from the agencies.

Peter Shiff, president of Euro Pacific Capital, said the rating agencies' moves this week were too little, too late. He said lenders knowingly relied on inaccurate data. "If the lenders themselves call them liar loans, why should we think they're boy scouts?"

Schiff added: "And it's not just people with bad credit that lied on their mortgages."

HP'ers, get ready for the big one

It's already well underway. And the insiders are getting out.

Knowing what you know now, if you aren't prepared by now, you better hurry. Time indeed is running out.

Robert Rodriquez, chief executive officer of First Pacific Advisors, was even more blunt. "We haven't seen much of a problem in the subprime area [but only] because the pricing is a fraud; the ratings are bullshit," said the two-time recipient of Morningstar's Fund Manager of the Year.

"I don't buy these prices, but as long as someone can provide capital to keep the finger in the dike, the charade will go on."

Rodriguez anticipates a huge drop in the prices of both long-term and high-yield debt and avoids both in his portfolio; as a result, it currently has about 41% of assets in cash. This cautious approach may temper gains, but it also reduces volatility: The fund hasn't suffered a calendar-year loss since Rodriquez took charge in 1984, according to Morningstar.

FLASH: The center no longer holds, and today was the day when it all fell apart. S&P admits to the biggest financial con game of all time.

In order for the Great Housing Con Game to work, the bagholders (the buyers of the toxic subprime and liar's loan crap) had to believe that one day they'd get paid back. Even though this garbage was being lent out to people who lied about their jobs, their income and their ability to pay. Or worse yet to people with no jobs, no credit, no income, no honesty, no problem gaming the system themselves and absolutely positively no possible way to make good on the loans once the Ponzi Scheme ended.

Yes, think Casey Serin. Think David Crisp. Think of all the get-rich-quick failed flippers, think the $30,000 income families buying $800,000 homes, think Phoenix, think Miami, think all the sheeple who thought real estate could only go up and up.

So why did the bagholders of these mortgages (China, hedge funds, pension funds, overseas investors), which were so nicely bundled up into neat little CDO's, think they'd get paid back? Why did they think that obvious hilarious loan garbage was worth the price they were paying?

Because the "unbiased ratings agencies" told them so.

Well, not anymore. S&P, one of the three major CDO ratings agencies, now staring lawsuits, jail sentences and the collapse of their game straight in the face, bitchslapped the housing and mortgage market today and simply came clean, in one of the ugliest financial mea-culpas I've ever seen. Simply put, the charade is over. And hundreds of billions, more likley trillions, will now be lost.

So now, the housing collapse goes into overdrive. The Subprime and Alt-A industries die. Hedge funds worldwide fail. Pension funds screw their retirees. Markets crash. China gets pissed. Lending tightens even more. Demand plummets even more. And home prices crash even faster.

It's all over folks. Now we just count up the damage and look for someone to blame.

S&P finally says subprime is mostly junk - New methodology is death knell for the troubled industry

WASHINGTON (MarketWatch) - Standard & Poor's just drove a huge harpoon into the heart of the mortgage credit bubble and it's going to take a long time to clean up the mess once the beast finally dies.

S&P, one of the three main credit-rating agencies that served as enablers of the subprime mortgage boom, announced Tuesday that it would lower its ratings on 612 bonds, a small portion of the mortgage-backed securities it had given its seal of approval to.

But the bigger news is that S&P isn't going along with the charade any more. S&P said it would change its methodology for ratings hundreds of billions of dollars in residential mortgage-backed securities.

And it would review its ratings on hundreds of billions of dollars in the more complex collateralized debt obligations based on those subprime loans.

A lot of debt will be downgraded to junk status. A lot of that debt will have to be sold at fire-sale prices. A lot of pension funds and hedge funds that once thrived on the high returns they could get from investing in subprime junk will now lose a lot of money.

S&P's announcement is a death warrant for the subprime industry. No longer will mortgage brokers be able to help buyers lie their way into a home. Fewer stressed homeowners will be able to refinance their mortgage, thus extending and exacerbating the housing bust.

"We do not foresee the poor performance abating," S&P said. Prices will fall, and foreclosures will rise. More mortgage fraud will be uncovered as the tide goes out.

For true HP wonks, you can read the whole nasty report here.

IndyMac's solution to nobody wanting to buy their Alt-A liar's loan cancer? Hold on and pray.

A bit wonkish, but follow me...

So a mortgage company like IndyMac pays mortgage brokers to get suckers (oops, Home Debtors) to sign up for toxic "liar's loans", then repackages the hot potatoes and sells them off to the market (China, hedge funds, etc) as CDO's (collaterized debt obligations).

It was good business the past few years, when home prices were going up and it was tough to lose on a home.

Not anymore.

Now those toxic liar's loan Home Debtors (i.e. the Casey Serins and failed flippers of the world), with home prices plummeting, stop making the payments, and eventually just turn in the keys.

So the market that was buying up the junk got wise, that the loans ain't gettin' paid back, and now IndyMac has a choice - sell the hot potatoes on down the stream for significantly less than face value, or hold 'em and hope things turn around (yeah, right!).

An honest and ethical company if they chose Option B would increase their reserve for bad debt, and reflect the market value of their junk paper on their balance sheet. But IndyMac thinks they're above that. And we all know how this ends.

Yup, I'm short IndyMac via October put options. I'm betting they'll have to come clean by then (they do have auditors, don't they?)

This article spells it all out. Enjoy. One word: Enron.

Lending's next tsunami? Borrowers in the credit niche above subprime are missing more home loan payments. Another crop of lenders is trying to regroup and stem loan losses.

Michael Perry, chief executive of IndyMac Bancorp, is stubborn when it comes to delinquent loans.

He refuses to ditch them, even as they expand rapidly on the books of Pasadena-based IndyMac, which has two units based in Irvine and is the largest U.S. lender in a credit category dubbed "Alt-A," which is one level above the risky subprime niche. It turned in a company record of $90 billion in loans last year.

During an April 26 conference call with analysts, Perry said the company didn't sell a single dud loan in the first three months of the year because no one wanted to pay what he thinks they're worth. No way is IndyMac selling to a hedge fund for "pennies on the dollar," Perry said.
In that time, IndyMac's sour loans and foreclosed real estate ballooned 75 percent to $324 million.

"We are not going to fire-sell when we have the intent and ability and expertise to work through those loans and sell them ourselves," he said.

But Indymac and others who deal in Alt-A loans, such as Impac Mortgage Holdings of Irvine and Downey Financial of Newport Beach, may not have time to wait. The same problems shaking up the subprime market are now emerging in the Alt-A industry.

What's more, a Register analysis shows reserves for loan losses by these companies are not keeping pace with delinquent loans. Analysts say the same problem bedeviled New Century Financial of Irvine last year – and that helped send the once-top U.S. subprime lender into bankruptcy court after its financial backers lost faith in its accounting and liquidity.

Today's the Day! Will Liar's Loan Alt-A kings Countrywide and IndyMac (finally) come clean?

Or will their insider-trading stock-pumping CEO's continue with the deception on their way to Ken Lay / Bernie Ebbers / Dennis Kozlowski fates?

Oh, how the screw turns... This story is playing out like a great Greek tragedy, wouldn't you say?

My guess today is more deception. I don't think they'll tell the market what's really going on with their Alt-A portfolio until after it's really hit the fan.

For you wonks out there, try to jump on the conference calls and report back here. That's where the real fireworks should be.

(Note I'm short NDE, not short CFC at the moment)

Liar's Loans (Alt-A), a housing crash and IndyMac: Trouble ahead...

This may be a big wonkish, but here's the dealio.

Mortgage backed security investors, who buy up the loans packaged as collateralized mortgage obligations (CMO's), had a bit of a come-to-jesus recently with the subprime meltdown. So now they've wizened up to the con, and they're telling the Alt-A (Liar's Loan) companies that they're not gonna buy their junk anymore, or at least not at par value.

Why? Let's me put this in HP terms. Would any of you buy up Casey Serin's Liar's Loan portfolio? Yeah, that's what I thought.

IndyMac is the big kahuna in this space, with nearly 80% of their entire portfolio made up of this junk. Nice business when the getting was good and investors were buying up any debt they could find.

But not anymore. Party over.

It's been fun to watch their CEO (and #1 stock holder) Michael Perry pump his stock to the dubious market, screaming that they're not to be confused with those yucky subprime lenders, and how all is well. You also have the CEO and a few insiders trying to confuse the market and stop the hemorrhaging (of their stock holdings) by buying some nibbles of their own stock. Man, sometimes it's just so obvious.

You have to wonder how long until the SEC investigation, or in this case criminal charges are filed. There's this little thing called Sarbanes Oxley, where intentionally manipulating your stock, or not coming clean about your financials or prospects presents a wee bit of a problem for crooked CEOs and CFOs.

IndyMax reports Q1 this week. Let's see if they come clean on what's happening in their business, or if they choose to head down the Enron / Ken Lay / WorldCom / Bernie Ebbers well-worn path.

Note - I own a few IndyMac puts, betting the stock will (eventually) fall. This one is the mother of insider manipulation and disinformation, not for the wary, but it's a fun ride...

Countrywide's Mozilo takes $140,000,000 off the top - and sends the CFO out to pump up the stock yesterday (so he can sell some more)

The sheer volume and brazenness of this insider selling at Countrywide is staggering. Nearly $600,000,000 in sales, and $73,000 in buys. No, that's not a misprint.

And in the middle of this historic subprime / lending meltdown, instead of coming clean like HSBC and announcing the size of the write-off, Mozilo sends the CFO out yesterday to pump up the stock (so he can sell some more), having him say "We're a top-conditioned athlete" and that they have no problems, unlike all their competitors that are going belly-up.

So, why is the top conditioned athlete selling everything he has then? If times are so rosy ahead, wouldn't he be buying or holding instead?

Note: I'm gleefully short CFC.

Wall Street Journal: How Countrywide CEO Wins Amid Mortgage Mayhem

If you're looking for a big winner in the subprime-mortgage meltdown, try Angelo Mozilo.

The take-no-prisoners chief executive of Countrywide Financial sold $140 million of his personal holdings of Countrywide's stock in the past 14 months -- before last week's news that the delinquency rate on his company's subprime mortgages was soaring.

Even so, he expects shareholders to be grateful.

Mr. Mozilo's company didn't lead the subprime race-to-the-bottom in recent years, during which mortgage companies offered ever-easier terms to ever-more questionable borrowers. But he didn't slam on the brakes, either.

As subprime lending implodes, Angelo Mozilo is selling Countrywide shares as fast as he can

While putting out reassuring words to the street, false rumors of a pending acquisition by BofA, and holding back any information about what's really going on with CFC's imploding portfolio (Sarbanes-Oxley anyone?), this guy is dumping his shares as fast as possible, while his stock, industry and country's financial system melts down

Ah, only in America folks. Only in America.

Here's his soothing words the other day, from one of the largest subprime lenders in the US:

Chief Executive Officer Angelo Mozilo said last month the company pulled back from subprime loans in 2006.

"If you look at our market share, we lost some for the first time in years, but it's all in the subprime area,'' he said in a Feb. 8 interview, adding the company holds only higher- quality prime loans at its bank. ``We were a dominant player, and now subprime is a pretty small portion of our business.''

And here's his trades just this year (note - I'm still gleefully short CFC)

2-Mar-07
46,000
CFC
Option Exercise at $9.60 per share. (Cost of $441,600)
2-Mar-07
46,000
CFC
Automatic Sale at $37.18 per share.(Proceeds of $1,710,280)
1-Mar-07
70,000
CFC
Option Exercise at $9.60 per share. (Cost of $672,000)
1-Mar-07
70,000
CFC
Automatic Sale at $37.10 per share.(Proceeds of $2,597,000)
28-Feb-07
46,000
CFC
Option Exercise at $9.60 per share. (Cost of $441,600)
28-Feb-07
46,000
CFC
Automatic Sale at $37.91 per share.(Proceeds of $1,743,859)
22-Feb-07
70,000
CFC
Automatic Sale at $40.45 per share.(Proceeds of $2,831,500)
21-Feb-07
46,000
CFC
Option Exercise at $9.60 per share. (Cost of $441,600)
21-Feb-07
46,000
CFC
Automatic Sale at $40.77 per share.(Proceeds of $1,875,420)
21-Feb-07
70,000
CFC
Option Exercise at $9.60 per share. (Cost of $672,000)
15-Feb-07
70,000
CFC
Option Exercise at $9.60 per share. (Cost of $672,000)
15-Feb-07
70,000
CFC
Automatic Sale at $41.88 per share.(Proceeds of $2,931,600)
13-Feb-07
46,000
CFC
Option Exercise at $9.60 per share. (Cost of $441,600)
13-Feb-07
46,000
CFC
Automatic Sale at $41.26 per share.(Proceeds of $1,897,960)
13-Feb-07
241,081
CFC
Acquisition (Non Open Market) at $0 per share.
12-Feb-07
70,000
CFC
Option Exercise at $9.60 per share. (Cost of $672,000)
12-Feb-07
70,000
CFC
Automatic Sale at $41.19 per share.(Proceeds of $2,883,300)
9-Feb-07
46,000
CFC
Option Exercise at $9.60 per share. (Cost of $441,600)
9-Feb-07
46,000
CFC
Automatic Sale at $43.69 per share.(Proceeds of $2,009,740)
8-Feb-07
70,000
CFC
Option Exercise at $9.60 per share. (Cost of $672,000)
8-Feb-07
70,000
CFC
Automatic Sale at $43.47 per share.(Proceeds of $3,042,900)
5-Feb-07
46,000
CFC
Option Exercise at $9.60 per share. (Cost of $441,600)
5-Feb-07
46,000
CFC
Automatic Sale at $44.61 per share.(Proceeds of $2,052,060)
2-Feb-07
70,000
CFC
Option Exercise at $9.60 per share. (Cost of $672,000)
2-Feb-07
70,000
CFC
Automatic Sale at $44.52 per share.(Proceeds of $3,116,400)
26-Jan-07
23,000
CFC
Option Exercise at $9.60 per share. (Cost of $220,800)
26-Jan-07
23,000
CFC
Automatic Sale at $40.40 per share.(Proceeds of $929,200)
24-Jan-07
70,000
CFC
Option Exercise at $9.60 per share. (Cost of $672,000)
24-Jan-07
70,000
CFC
Automatic Sale at $41.65 per share.(Proceeds of $2,915,500)
22-Jan-07
23,000
CFC
Option Exercise at $9.60 per share. (Cost of $220,800)
22-Jan-07
23,000
CFC
Automatic Sale at $41.27 per share.(Proceeds of $949,210)
19-Jan-07
70,000
CFC
Option Exercise at $9.60 per share. (Cost of $672,000)
19-Jan-07
70,000
CFC
Automatic Sale at $41.24 per share.(Proceeds of $2,886,800)
18-Jan-07
23,000
CFC
Option Exercise at $9.60 per share. (Cost of $220,800)
18-Jan-07
23,000
CFC
Automatic Sale at $40.35 per share.(Proceeds of $928,050)
11-Jan-07
23,000
CFC
Option Exercise at $9.60 per share. (Cost of $220,800)
11-Jan-07
23,000
CFC
Automatic Sale at $42.18 per share.(Proceeds of $970,140)
10-Jan-07
70,000
CFC
Option Exercise at $9.60 per share. (Cost of $672,000)
10-Jan-07
70,000
CFC
Automatic Sale at $42.12 per share.(Proceeds of $2,948,400)
8-Jan-07
70,000
CFC
Option Exercise at $9.60 per share. (Cost of $672,000)
8-Jan-07
70,000
CFC
Automatic Sale at $42.05 per share.(Proceeds of $2,943,500)
5-Jan-07
23,000
CFC
Option Exercise at $9.60 per share. (Cost of $220,800)
5-Jan-07
23,000
CFC
Automatic Sale at $42.37 per share.(Proceeds of $974,509)
4-Jan-07
70,000
CFC
Option Exercise at $9.60 per share. (Cost of $672,000)
4-Jan-07
70,000
CFC
Automatic Sale at $42.22 per share.(Proceeds of $2,955,400)