KYRA PHILLIPS, CNN HOST: Some former Countrywide executives are mopping up some of their own mortgage messes today. Not out of the goodness of their hearts or anything, they actually found good profits in lad loans.
Kara Finnstrom has our story.
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KARA FINNSTROM, CNN CORRESPONDENT (voice-over): Countrywide will be remembered for the risky loans that made its executives rich but then defaulted in vast numbers causing the company to collapse and some say contributing to the nation’s mortgage crisis.
Now about a dozen former Countrywide executives have formed a company called PennyMac. They’re buying up delinquent home mortgages on the cheap. For so much less than face value, PennyMac can renegotiate the loans and still make a profit. PennyMac says it’s helping families avoid foreclosures. The company also stands to make millions.
ADLAI WERTMAN, USC MARSHALL SCHOOL OF BUSINESS: It’s perfectly legal. It just doesn’t seem to pass the smell test.
FINNSTROM: Financial analysts and consumer groups are speaking out.
JAMIE COURT, CONSUMER WATCHDOG.ORG: It’s outrageous that the executives that created this mess knowingly putting people in loans they couldn’t afford are now poised to make a fortune cleaning it up.
FINNSTROM: Stanford Kurland, a former second in command at Countrywide, heads PennyMac. Kurland left Countrywide more than a year before it collapsed. He’s now named in numerous lawsuits against Countrywide for its lending practices. Kurland declined our interview request but told the "New York Times" he left Countrywide before the company began making its riskiest loans and should not be blamed for what happened as a result.
As far as the new company, PennyMac released this statement. "PennyMac’s business model depends on our ability to help borrowers stay in their homes, and we put together a team with the experience to do that. With this goal, we’ve developed loan programs that avoid foreclosure by addressing the borrowers’ ability to pay their mortgage. We have offered help to hundreds of families in the past year, and we are eager to help as many as we can."
WERTMAN: The question is how do we feel about trusting them?
FINNSTROM: USC business professor Adlai Wertman and many other experts believe companies like PennyMac that that buy up bad loans, service them and keep taxpayers from footing the bill may turn out to be an important part of solving this housing crisis.
WERTMAN: It’s exactly what we should be doing and what the private sector should be doing. We just have to make sure that they’re doing it in a manner that’s fair to all parties involved.
FINNSTROM: How to ensure that and whether there should be greater oversight or perhaps new regulations for companies like PennyMac is now a growing debate.
Kara Finnstrom for CNN, Los Angeles.
