Mozilo, a butcher's son, became mortgage king

In the early days of Countrywide Financial Corp, competitors underestimated Angelo Mozilo, the mortgage lender's founder.

Mozilo, born in 1938, the son of Italian immigrants, recalled decades later how some in the white patrician world of mortgage banking judged him disparagingly because of his dark brown skin.

But through grit and hustle, Mozilo, the son of a Bronx butcher, built Countrywide into the largest mortgage lender in the United States.

Mozilo founded Countrywide in 1969 and became one of corporate America's top-paid executives. Mozilo received about $387 million from pay and stock option gains from 2002 to 2006, U.S. regulatory filings show.

Yet on Friday, he agreed to let his company be taken over by Bank of America Corp in a $4 billion deal which comes days after Countrywide's shares were pummeled by bankruptcy rumors.

Mozilo pushed the once dominant U.S. mortgage lender into a liquidity crisis by relaxing lending standards on risky subprime loans.

Escalating defaults and falling housing prices conspired to squeeze Countrywide and other lenders while sapping the U.S. economy.

Mozilo has been criticized for unwinding his stake in Countrywide throughout the housing downturn, using a prearranged trading plan to cash in tens of millions of dollars worth of stock options.

Mozilo's employment contract runs through the end of 2009, when he will be 71 years old.

But Bank of America Chief Executive Kenneth Lewis said on Friday Mozilo was unlikely to play any management role after the takeover is completed.

I would want him to stay until the deal gets done, Lewis said, and then probably I would guess that he would then want to go have some fun.

HEALTH BENEFITS FOR LIFE

Countrywide's board has paid Mozilo far better than top executives at much larger financial institutions.

In 2006, for example, Mozilo's pay -- $48 million -- topped that of JPMorgan Chase & Co Inc Chairman and Chief Executive Jamie Dimon ($38 million) and the $28 million Bank of America paid Lewis.

Mozilo could receive about $36 million following the Bank of America sale, according to regulatory filings and compensation experts interviewed by Reuters.

Other estimates put the amount even higher, with the Los Angeles Times estimating his payout at more than $110 million, including health benefits for life for him and his wife, and gross-up payments to cover his taxes.

Early in the housing downturn, Mozilo said Countrywide would take advantage of the situation by expanding its market position.

He said in May that he planned to add 2,000 sales jobs. But that boast fizzled when a worsening housing outlook forced Mozilo to get a $2 billion capital infusion from Bank of America as he contemplated slashing up to 12,000 jobs.

In 2006, Countrywide originated $461 billion worth of loans. Nearly $41 billion of that activity was in the subprime market.

In May, Mozilo and many other leaders in the mortgage industry still seemed to be in denial over the depth of the subprime lending crisis.

He was in no mood for soul-searching about what went wrong as industry executives gathered in Manhattan for a Mortgage Bankers Association conference.

CHANGING THE RULES

You've got to be careful here about blaming ourselves too much, Mozilo told the gathering.

The real culprits, he argued, were the Federal Reserve and its series of interest rate hikes, crooked real estate speculators, falling housing prices and regulators' attacks on interest-only and other risky subprime mortgages.

Unmentioned by Mozilo were the industry's loose lending policies and mortgage products such as liar loans, which gave borrowers money at higher rates without verifying their income.

But last April, in a speech in Beverly Hills, California, Mozilo conceded Countrywide lost its compass and chased risky customers as competition in that market increased.

Names like Ameriquest, New Century, NovaStar Financial and Ownit Mortgage Solutions set a new lowered standard, changing the rules of the game, Mozilo said.

Traditional lenders such as ourselves looked around and said, 'Well maybe there's a (new) paradigm here,' Mozilo said. 'Maybe we've just been wrong. Maybe you can originate these loans safely without verifications, without documentation,' Mozilo said.

(Editing by Brian Moss)