House Probe Uncovers 153 VIP Countrywide Loans to Fannie Execs
By: Carrie Bay
A federal investigation has exposed ties between Fannie Mae executives and Countrywide’s controversial “Friends of Angelo” VIP loan program, which was created by the subprime lender’s chief executive at the time, Angelo Mozilo.
Documents subpoenaed by Rep. Darrell Issa (R-California), ranking member of the Oversight and Government Reform Committee, revealed that 27 former employees at the government-sponsored mortgage company received 153 subsidized, low-cost loans through the specialty Countrywide program – a program that Issa says existed to buy friends in critical government and industry positions affecting the company’s business interests.
“As our nation marched down the path leading to a crippling financial crisis, Fannie Mae should have been trying to cool off risky subprime lending and protect the economy from a volatile housing bubble,” Rep. Issa said. “The sweetheart deals to officials at Fannie Mae…however raise serious doubt that they could have said no to the risky business practices of Countrywide.”
Some of the names on the VIP list include: Daniel Mudd, former Fannie Mae COO and CEO; Franklin Raines, former CEO; Jamie Gorelick, former vice chairman; and Jim Johnson, former CEO.
In a letter sent to Fannie Mae’s regulator, the Federal Housing Finance Agency (FHFA) this week, Issa points out that spikes in Countrywide’s VIP lending to Fannie Mae officials occurred in 1998 as Countrywide was negotiating a volume discount with the GSE, and again in 2001-2003, on the leading edge of a mortgage boom in which the subprime lender’s VIP loan unit expanded.
Rep. Issa went on to explain that in 1999, Countrywide reached an exclusive agreement to sell Fannie Mae billions of dollars in toxic mortgages at a discounted rate. He says the deal was designed by Fannie Mae to lock competitor Freddie Mac out of the market for Countrywide’s loans.
According to Issa, “Countrywide was very cognizant, calculating, and ultimately effective at furthering their bottom line by co-opting the very people who should have been acting as stewards of the mortgage market and instead swapped their responsibilities for VIP loans.”
Issa says this case cannot be closed without a criminal investigation and likely indictments against Countrywide officials and those people who knowingly accepted subsidized, below-cost loans in exchange for securing business dealings for Countrywide.
“I am committed to exposing the full scope of how actions taken by Countrywide through its VIP program and other lobbying efforts compromised federal government officials who should have been more vigilant and skeptical about risky lending practices,” Issa said.
Last year, DSNews.com reported on Countrywide VIP loans that were given to Senate Banking Committee Chairman Christopher Dodd (D-Connecticut) and Senate Budget Committee Chairman Kent Conrad (D-North Dakota). The Senate Ethics Committee cleared the senators of any wrongdoing, saying that no evidence could be found that they received preferential terms or conditions on the four Countrywide mortgages between them.
Issa’s investigation has revealed that executives at Freddie Mac were also participants in the Countrywide VIP loan program.
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