Ex-Countrywide president profits from distressed mortgages

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The Independent Online

For those limber enough to leap on and off the merry-go-round of an economy spinning from boom to bust, the rewards can be great, even if the rest of us think some people do not deserve to ride at all. Take the former president of the collapsed US mortgage giant Countrywide, Stanford Kurland, for instance.

Mr Kurland, who was key in pushing Countrywide, now part of Bank of America, into the mass marketing of dodgy mortgages with teaser rates that contributed so much to the current economic morass, has been unmasked as the man now heading a company called PennyMac that exists precisely to buy up as many distressed mortgages as possible from floundering banks and the US government for big profits.

"Off-the-charts good," is how one executive at PennyMac (full name: Private National Mortgage Acceptance Company), recently described business, according to The New York Times, which broke Mr Kurland's cover yesterday.

The game for PennyMac is not complicated. With torrents of bailout money springing forth from Washington, the company is able to buy distressed mortgages at pennies on the dollar from banks and from the government's own Federal Deposit Insurance Corporation, FDIC. Because it gets them at such bargain-basement cost, it can then drastically reduce interest rates on those mortgages to entice defaulting homeowners to resume their payments. The money comes in again and foreclosures are averted.

However, Mr Kurland's reincarnation in the mortgage business was sparking a degree of moral outrage yesterday. "He is seeking to capitalise on a situation that was a product of his own creation," said Blair Nicholas, a lawyer for retired Arkansas teachers, one of a number of groups who are suing Mr Kurland and other former Countrywide executives. "It is tragic and ironic. But then again, greed is a growth industry."

Margot Saunders, a lawyer with the National Consumer Law Centre, said: "It is sort of like the arsonist who sets fire to the house and then buys up the charred remains and resells it."

Mr Kurland is being aided by several former colleagues from Countrywide. And that, by his reckoning, is how it should be. "It is very important to the entire team here to be part of the solution," he told The Times. It is their road to redemption.