Even after paying a $67 million settlement to the SEC and being banned from the mortgage industry Angelo Mozilo, founder and former president of Countrywide Financial Corp still says his company never made a loan "that we knew the borrower could not pay."  Mozilo defended Countrywide in a deposition made last year in connection with a law suit by MBIA, Inc against Bank of America (BoA) which bought Countrywide in 2008.  The deposition was filed in the New York Supreme Court earlier this week.

The MBIA lawsuit is one of many brought against Bank of America since it acquired Countrywide.  It is estimated that the bank has so far spent more than $40 billion trying to clean up defective mortgages and improper foreclosures caused by the mortgage company's lax lending standards.

But according to an article in Bloomberg, Mozilo said that he had no regrets about how he had run his firm, and denied that Countrywide had caused the housing crisis.  "This is all about an unprecedented, cataclysmic situation, unprecedented in the history of this country. Values in this country dropped by 50 percent," he said.  

Mozilo contends he only agreed to the $67.5 million regulatory settlement in 2010 to protect his family. "It had nothing to do with anything that I did at Countrywide or anything I did in my personal life."  Relatives "were being harassed in school. My name was in the paper every day nationally and internationally, accusing me of things that were absolutely untrue. I could not have my family go through it anymore, and that's why I settled."

MBIA's suit in the New York State Supreme Court is seeking judgments against BoA for home loans written by Countrywide between 2004 and 2007 which were later packaged into securities.  MBIA guaranteed payments to investors who purchased the securities which the bond insurer maintains were riskier than promised.  The suit claims that more than 56 percent of some 200,000 loans were materially defective; an amount plaintiff's attorneys equate to $12.7 billion.

Bloomberg quotes Philippe Selendy, an attorney with Quinn Emanuel Urquhart & Sullivan which represents MBIA, as saying that the risk should never have been passed to the insurer;  "The loans should have never been in there. The probability of default is exceptionally high."   He said the loan files were missing key documents and cited examples of loans where borrowers had substantially misrepresented their income.

Another spokesperson for MBIA told Bloomberg that the company has already paid more than $3 billion in claims to investors and that its claims against BoA total more than $4.5 billion.  The firm is seeking $3 billion in damages and repurchase by BoA of more than $12 billion in loans.

The bank's Countrywide division maintains that MBIA insured the securitizations even though they knew the lender's loans were becoming riskier and did not do proper due diligence before doing so.  "Rather than accepting responsibility for the insurance policies it wrote, MBIA seeks to walk away from its contracts," a spokesperson for Countrywide said.

Mozilo, in his deposition, continues his long standing defense of his former company.  "I have no regrets about how Countrywide was run," Mozilo said. "We were a world-class company in every respect."

 "We never made a loan knowingly -- and it would be stupid to do so -- that we knew the borrower could not pay. Never," Mozilo said. "All our loans had that one standard from 1968 to the end of my rein at Countrywide."

His record $67.5 million payment settled an SEC claim that he had known about the deteriorating quality of loans made by Countrywide but continued to mislead investors even while his internal communications described some products as toxic.  He was accused also of insider trading, accelerating his stock sales to make a reported $140 million.  He admitted no wrongdoing in resolving the accusations.