The Securities and Exchange Commission today leveled charges against three former executives of Countrywide Financial, (now part of Bank of America) the company that became synonymous with the subprime mortgage meltdown. Former CEO Angelo Mozilo, and two other former execs, were accused of misleading investors by telling them that the loans that they were making were to safe, credit-worthy borrowers, when in fact Countrywide was increasingly making exotic, adjustable-rate, “no-money down” loans to people with poor credit scores and little documentation to prove they could pay.

Mozilo is also charged with insider trading for selling $140 million of Countrywide stock from November 2007 through August 2007, while knowing that the mortgages the company was making were growing increasingly risky.

Though these allegations primarily concern investors in the company, there’s pretty revealing stuff in the complaint about how much was known before the housing market went sour. Included in the complaint are transcripts of emails from Mozilo to other Countrywide execs. As far back as 2006, Mozilo knew of problems with Pay-Option ARMs–one of Countrywide’s premier products–which were mortgages for which the interest rate adjusted monthly. People who chose interest-only payments were often hit with payment shock when their mortgage payments reset.

“We have no way, with any reasonable certainty, to assess the real risk of holding these loans on our balance sheet,” wrote Mozilo on Set 26, 2006 about the option ARMs. “The bottom line is that we are flying blind on how these loans will perform in a stressed environment of higher unemployment, reduced values and slowing home sales.”

In another email exchange he discussed the subprime 80/20 mortgages the company was originating, saying: “In all my years in the business I have never seen a more toxic product.”—Chris Fichera