Mr. Mozilo said aggressive buying by Wells and other big banks drove profit margins too low in correspondent lending.
Wall Street firms, including Lehman Brothers Holdings Inc. and Bear Stearns Cos., are emerging as bigger rivals in home-mortgage lending, expanding beyond their business of creating and trading in mortgage securities. “They don’t know anything about the mortgage business, which makes them a dangerous competitor,” Mr. Mozilo said. These firms “have no hesitation about paying two or three times what we would pay personnel because they’re used to the big bucks.”
Countrywide says it has been careful to give these loans only to borrowers with relatively strong finances. Still, the test of these loans will come when borrowers face “resets” to higher monthly payments, Mr. Mozilo said during the conference call. “I’m not sure exactly what will happen then,” he added.
