The Book
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The Authors
Click here for detailed profiles of the authors.
Paul Muolo executive editor of National Mortgage News, the leading independent trade publication of the residential finance industry. He also has a popular blog titled What We're Hearing
Matt Padilla is a business reporter for the Orange County Register, a newspaper reaching close to 300,000 households in Southern California. Matt also has a popular blog titled Mortgage Insider.
Related Sites
Introduction
... Something had gone awry. A million or so people had lost their homes to foreclosure. Two or three million would follow in their path by the end of the decade. It wasn't just housing and mortgages that were ailing. It seemed as though the nation was getting hit from all different directions: rising energy and commodities prices, falling home values, banks pulling credit lines of all sorts including commercial and student loans. The mortgage virus had spread, infecting the entire body. It was as though the U.S. economy, which had burned so brightly during the Bush years, was a mirage. Angelo had been wrong. The capital markets -- Wall Street -- had failed us. This is the story of how it happened.
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Media Coverage
Reader Comments
What readers are saying about Chain of Blame:
- "I love your book! I’m on page 74, and I am learning SO much. I’m investigating a scam exactly like the one you describe on page 70, where African-American loan broker (and former stripper) Joyce Jenise Jackson helped Melvin and Nadine Proctor with their mortgage payments by letting them put their house in the name of a friend of Jackson for a year, during which time Jackson refinanced the house for the market value and took the extra cash herself." -- Mary Fricker
- "I just completed "Chain of Blame'' which I found most interesting and well documented. Your overall premise, that greed and the quest for profits brought about the mess, is dead on." -- Whitney O'Keeffe, Augusta, Ga.
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News Updates
Chain of Blame chronicles the subprime meltdown from its inception until the book went to press in early June of 2008. Alas, the crisis continues. These are some key events that happened recently:
- August 18, 2008 -- The share prices of Fannie Mae and Freddie Mac fall more than 20% on the day after press reports suggest the Treasury Department may be forced to buy stock in the two companies to keep them afloat. In the second quarter Fannie Mae posted a $2.3 billion loss in the second quarter of 2008, Freddie Mac $821 million.
- July 30, 2008 -- President Bush signs a landmark housing/mortgage bailout bill to shore up the nation's housing finance system. It includes $300 billion in new mortgages that can be insured by the Federal Housing Administration.
- July 18, 2008 -- Lori Mozilo, the youngest sister of Angelo Mozilo, defends the former Countrywide chief in the Huffington Post. In defense of her brother she says Angelo, "believed every American could one day own a home and be a part of the shared experiment called America." She also blames Sen. Charles Schumer (D-N.Y.) for causing a run at IndyMac Bancorp, which Mozilo started with David Loeb two decades ago. Indy Mac failed in early July after Schumer leaked two letters he wrote to regulators concerning IndyMac's use of brokered deposits to The Wall Street Journal. The letters were written to the heads of the FDIC and OTS.
- July 14, 2008 -- Merrill Lynch -- which once strived to take over the subprime lending market by purchasing First Franklin Financial -- posts a $4.7 billion net loss in the second quarter. It announced $9 billion in writedowns and losses that were partly mortgage-related.
- July 10, 2008 -- Prices of Fannie Mae and common stock have plummeted over the past four days on concerns that the mortgage giants will have to raise substantially more capital this year to get through the housing downturn or the government will have to prop them up. The stock prices of the two government-sponsored enterprises plunged on Thursday after William Poole, former president of the Federal Reserve Bank of St. Louis, told Bloomberg that the two housing GSEs are insolvent.
- July 1, 2008 -- Florida Attorney General Bill McCollum sues Countrywide Financial and its former chairman Angelo Mozilo for allegedly engaging in deceptive and unfair trade practices in originating subprime loans. The AG's lawsuit says the Calabasas, Calif.-based lender failed to ensure that borrowers could repay their loans and even placed prime borrowers into higher interest rate subprime loans.
- July 1, 2008 -- Bank of America, Charlotte, completes its acquisition of Countrywide Financial Corp., creating the nation's largest mortgage originator and servicer. In January, BoA agreed to buy Countrywide for $4 billion in stock, but as the Charlotte bank saw its share price fall this year, so did the value of the deal. The final sale price is in the range of $2.5 billion, on top of the $2 billion that BoA paid last summer for a 16% stake in Countrywide.