Countrywide Credit

Link CEO Pay to Reducing Predatory Lending

WHEREAS, the sub-prime lending industry has come under increasing public scrutiny for predatory lending directed at low-income people, elderly homeowners, neighborhoods of recent immigrants, and communities of color. Eight states, including New York, California, Illinois and North Carolina have adopted laws aimed at curbing predatory lending abuses. Federal regulators and legislators are also considering measures to protect sub-prime borrowers.

WHEREAS, Countrywide Credit’s executive officers have made public statements committing to business practices free of predatory lending. We believe our corporate leaders should be evaluated based on their success in meeting these commitments.

WHEREAS, predatory lending behavior is expensive for borrowers. According to the North Carolina-based Coalition for Responsible Lending, predatory practices cost borrowers more than $9 billion annually. Controversial practices such as the inclusion of pre-payment penalties, which is a provision of 80% of sub-prime loans, mean that economically vulnerable borrowers often cannot afford to take advantage of falling interest rates by refinancing their loans. Conventional borrowers refinance with ease. Only 2% of conventional loans carry prepayment penalties. (Source: Standard & Poors)

WHEREAS, in order expand its subprime mortgage business, Countrywide hired an executive from Associates First Capital, the firm with the most well-documented record of predatory lending abuses. In addition, Countrywide has ramped up its purchases of subprime mortgage loans from independent mortgage brokers, at a time when others in the subprime industry, including Citigroup’s Associates First, are eliminating the use of mortgage brokers because of the prevalence of abusive practices in the past.

WHEREAS, Countrywide Credit has publicly stated its desire to end predatory lending practices in the sub-prime lending industry, yet our company has also lobbied against adoption of strict predatory lending legislation at the state and local levels. In response to North Carolina’s anti-predatory lending law, Countrywide ceased its subprime lending operations in the state.

RESOLVED, shareholders request that the Board conduct a special executive compensation review to study ways of linking a portion of executive compensation to successfully addressing predatory lending practices. Among the factors to be considered in this review: implementation of policies to prevent predatory lending; constructive meetings with concerned community groups; and reductions in predatory lending complaints filed with government bodies. A summary of this review will be published in the Compensation Committee’s report to shareholders.

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