Countrywide Financial Corp. President David Sambol, who became a target for critics of the mortgage company's loan practices and executive pay, will leave after Bank of America Corp.’s takeover instead of running the combined home lending operations as originally planned.
According to a statement released Wednesday, Barbara Desoer, Bank of America’s chief technology and operations officer, will lead consumer real estate operations and Sambol will retire.
Desoer, 55, will report to Chief Executive Officer Kenneth Lewis.
Sambol and Countrywide Chief Executive Officer Angelo Mozilo have been under fire since Bank of America agreed in January to buy Countrywide for about $4 billion. Lax lending by their company, the biggest U.S. home lender, has been blamed for contributing to record U.S. foreclosures, and critics including U.S. Sen. Charles Schumer had asked Bank of America to reconsider the decision to put Sambol in charge.
“I don't think there was any doubt that Bank of America wanted him, but there's a philosophical shift there that David may not want to have been part of,” said David Lykken, president of Mortgage Banking Solutions, an Austin, Texas-based consultant.
Bank of America is opting for less risky mortgages and reining in Countrywide’s entrepreneurial culture, he said.
Buoyed by yesterday’s announcement of progress toward completing the deal, Calabasas, Calif.-based Countrywide rose 39 cents, or 8.5 percent, to $4.98 at 4:15 p.m. yesterday in New York Stock Exchange composite trading. Bank of America lost 30 cents to $33.87.
Mozilo intends to leave the combined company after the merger, which is expected to be completed in early July.
“Bank of America has done the right thing in deciding not to make Mr. Sambol part of its future plans,” said Schumer, a New York Democrat, in an e-mailed statement, adding he hopes Bank of America will “clean up” Countrywide’s lending. “You cannot divorce Countrywide, the company, from the executives who pioneered Countrywide's predatory practices.”
The bank's initial decision to keep Sambol included a $28 million compensation package to induce him to stay. Sambol gets the package, which pays out over three years, even though he’s retiring, said spokesman Robert Stickler. Sambol, 48, declined a request for comment, Countrywide spokesman Rick Simon said.
“We felt it was very, very important that we have someone who is rooted in our culture and the way we do business and who has relationships throughout the company,” Bank of America spokesman Robert Stickler said. “That's why we are sending one of our most senior executives to California.”
Desoer headed Bank of America’s California retail banking group for two years in the 1990s before the merger with NationsBank Corp. She will be based in Calabasas.
Net revenue more than doubled at Countrywide during the U.S. housing boom of 2002 through 2006 as the company loosened underwriting standards to compete for borrowers. Sambol, who joined Countrywide in 1985, succeeded Stanford Kurland as president and chief operating officer in September 2006. Analysts viewed him as the likely successor to Mozilo, who co- founded Countrywide in 1969.
Bank of America also realigned its consumer banking unit, which provides more than half of the company's profit. Liam McGee, president of the consumer and small business bank, will no longer oversee credit cards and mortgages, said Stickler. Bruce Hammonds, the former CEO of MBNA Corp. before the credit card company's sale to Bank of America in 2006, will be president of a new credit card and unsecured lending business unit. Desoer, McGee and Hammonds will report to Lewis.
“Bank of America is going to ride herd on quality control and make sure they don't make any missteps,” said Tony Plath, a finance professor at the University of North Carolina at Charlotte. He cited Wachovia Corp.'s mistake in buying Golden West Financial Corp. and not changing their culture fast enough.
Bank of America, which has top market shares in consumer deposits, credit cards and home equity loans, faces rising loan losses as home values decline at the fastest rate in at least seven years. U.S. housing prices aren't halfway through their likely decline, billionaire investor George Soros told a conference in London last week.
Losses on Bank of America's $118 billion of home-equity loans might top 2.5 percent, higher than the 2 percent to 2.5 percent projected three weeks earlier, McGee said on May 13. Customers holding 5.8 percent of the bank's credit-card debt were at least 30 days late in making payments on April 30, compared with an industry average of 4.1 percent, according to Bloomberg data.
Countrywide reported an $893 million loss in the first quarter as late payments and foreclosures escalated in California and Florida, which account for about half of its lending.
— Bloomberg News