Countrywide, Critic Join Forces
To Aid Subprime Borrowers

Countrywide Financial Corp., seeking to salvage a badly dented reputation in the home-mortgage market, plans to announce today a plan to cooperate with a nonprofit group that has been one of its harshest critics on a program that would help borrowers avoid foreclosure.

In another damage-control effort, Countrywide Chairman and Chief Executive Angelo Mozilo said he is "confident" an informal inquiry by the Securities and Exchange Commission will find no wrongdoing in his heavy selling of the mortgage lender's stock.

Countrywide, the largest U.S. home-mortgage lender by volume, has agreed with Neighborhood Assistance Corp. of America to restructure loans for people at risk of losing homes, Countrywide and the NACA said. The pact is notable because it teams the Calabasas, Calif., company with an organization that recently called for a boycott of Countrywide and held protests outside its branches.

Testifying before the House Financial Services Committee last month, Bruce Marks, chief executive of Boston-based NACA, called Countrywide "the prime example for both predatory lending and predatory servicing" of loans. Loan servicers collect payments and handle other administrative tasks, including foreclosures.

Mr. Marks said in an interview late yesterday the agreement will require Countrywide to cut many borrowers' payments to levels they can afford, based on an analysis of individual household budgets by the NACA, which fights lending abuses, helps arrange affordable loans and advises borrowers through 33 offices. He said he believes the cooperation will help tens of thousands of Countrywide borrowers. He hopes to enlist other lenders to adopt the approach. Countrywide approached the NACA less than two weeks ago about cooperating on loan workouts, he said.

Countrywide said earlier yesterday it expects to refinance or restructure up to $16 billion in loans by the end of next year for homeowners facing higher payments because their interest rates are "resetting" to higher levels. The company said it plans to contact 52,000 borrowers who are in a subprime loan but have "a strong payment history" to offer options to refinance them into prime loans. Subprime borrowers, who often have lower credit ratings, have to pay higher rates to compensate lenders for taking on more risk.

Countrywide also has taken a public battering over Mr. Mozilo's share sales. The SEC has been examining prearranged share-sale plans used by executives at many companies and recently requested information from Countrywide on Mr. Mozilo's use of such plans. These 10b5-1 plans were designed to allow senior executives to sell shares at regular intervals automatically. If executives pledge they don't have insider information when the plans are established, they can be a defense against insider-trading charges.

Mr. Mozilo modified his longstanding 10b5-1 plans late last year to increase sales of stock he obtains through the exercise of stock options. He sold $130.6 million in company stock in the first half of the year through executive sales plans, up from $60.4 million in the year-earlier half, securities filings say. The 68-year-old Mr. Mozilo has said he increased the pace of selling to diversify his personal investments in an orderly way before his retirement, set for December 2009.

In a statement sent to The Wall Street Journal yesterday, Mr. Mozilo said he welcomes the SEC review and that the company will cooperate fully. He added: "I would like to state categorically that at no time did I make any trading decisions on material, nonpublic information and that I fully complied with all applicable securities laws."

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