Federal regulators say former Countrywide CEO Angelo Mozilo personally approved mortgages for favored borrowers that violated the company's policies and lending standards.
The Securities and Exchange Commission had previously accused Mozilo of civil fraud and illegal insider trading. Now, the agency says Mozilo played a direct role in a program for preferential borrowers that has been the focus of congressional ethics inquiries.
Mozilo criticized Countrywide's chief risk officer for trying to block one of the loans, telling the officer that the company could well afford to approve the special mortgages, the SEC said in a filing last Wednesday in a Los Angeles federal court.
California-based Countrywide Financial Corp. was a major player in the market for high-risk subprime mortgages, the collapse of which touched off the financial crisis. The company became the biggest U.S. mortgage lender overall before the meltdown. It was bought by Bank of America Corp. in July 2008.
Last year the SEC accused Mozilo and two other former Countrywide executive of deliberately misleading investors about the risks the company took when the market was booming. Mozilo is the most high-profile individual to face federal charges stemming from the financial crisis. He and the other former executives have denied any wrongdoing.
"The 'exceptions' culture at Countrywide started at the top," the SEC said in its filing opposing the executives' motion for dismissal of the SEC's case. "In many instances, Mozilo approved loans that were in direct contravention of Countrywide's own credit policies and underwriting guidelines."
In addition, the three executives never disclosed "the high percentage of exception loans Countrywide was making" in company regulatory filings or sale documents for mortgage securities, the SEC said.
The SEC statements were first reported Tuesday by The Wall Street Journal.
Last year the Senate's ethics panel determined that Democratic Sens. Christopher Dodd of Connecticut and Kent Conrad of North Dakota did not break rules when they received mortgages from Countrywide. However, the panel scolded them for not being more careful to avoid the appearance of sweetheart deals.
Documents provided to another congressional panel under a subpoena show that Countrywide gave preferential mortgages to more than three dozen employees of Fannie Mae while the two big companies were locked in an expanding, multibillion-dollar business relationship in subprime mortgages.
And a Republican lawmaker said last month that documents show more senators and congressional staff members than previously known received favorable mortgages from Countrywide based on their perceived ability to help the company.