Report: Countrywide used loans for influence

WASHINGTON — The former Countrywide Financial Corp., whose subprime loans helped start the nation's foreclosure crisis, made hundreds of discount loans to influence members of Congress, congressional staff, top government officials and executives of troubled mortgage giant Fannie Mae, according to a House committee report.

The report, obtained by the Associated Press, said that the discounts — from January 1996 to June 2008, were not only aimed at gaining influence for the company but to help mortgage giant Fannie Mae. Countrywide's business depended largely on Fannie, which at the time was trying to fend off more government regulation but eventually had to come under government control.

Fannie was responsible for purchasing a large volume of Countrywide's subprime mortgages. Countrywide was taken over by Bank of America in January 2008, relieving the financial services industry and regulators from the messy task of cleaning up the bankruptcy of a company that was servicing 9 million U.S. home loans worth $1.5 trillion at a time when the nation faced a widening credit crisis, massive foreclosures and an economic downturn.

The House Oversight and Government Reform Committee also named six current and former members of Congress who received discount loans, but all of their names had surfaced previously. None were from Florida. Other previously mentioned names included former top executive branch officials and three chief executives of Fannie Mae.

Some of the discounts were ordered by former Countrywide chief executive Angelo Mozilo. Those recipients were known as "Friends of Angelo."

The Justice Department has not prosecuted any Countrywide official, but the House committee's report said documents and testimony show that Mozilo and company lobbyists "may have skirted the federal bribery statute by keeping conversations about discounts and other forms of preferential treatment internal. Rather than making quid pro quo arrangements with lawmakers and staff, Countrywide used the VIP loan program to cast a wide net of influence."

The Securities and Exchange Commission in October 2010 slapped Mozilo with a $22.5 million penalty to settle charges that he and two other former Countrywide executives misled investors as the subprime mortgage crisis began. Mozilo also was banned from ever again serving as an officer or director of a publicly traded company.

The report said Fannie assigned as many as 70 lobbyists to the Financial Services Committee while it considered legislation to reform the company from 2000 to 2005. Four reform bills were introduced in the House during the period, and none made it out of the committee.

Hit with staggering losses, Fannie and its rival Freddie Mac came under government control in September 2008. As of Dec. 31, 2011, the Treasury Department had committed over $183 billion to support the two companies — and there's no end in sight.

Among those who the report said received loan discounts from Countrywide:

• Former Senate Banking Committee Chairman Christopher Dodd, D-Conn.

• Senate Budget Committee Chairman Kent Conrad, D-N.D.

• Mary Jane Collipriest, who was communications director for former Sen. Robert Bennett, R-Utah, then a member of the Banking Committee. The report said Dodd referred Collipriest to Countrywide's VIP unit. Dodd, when commenting on his own loans, said he was unaware of receiving preferential treatment but knew his loans were handled by the VIP unit.

The Senate's ethics committee investigated Dodd and Conrad but did not charge them with any ethical wrongdoing.

• Rep. Howard "Buck" McKeon, R-Calif., chairman of the House Armed Services Committee.

• Rep. Edolphus Towns, D-N.Y., former chairman of the Oversight Committee. Towns issued the first subpoena to Bank of America for Countrywide documents, and current Chairman Darrell Issa, R-Calif., subpoenaed more documents. The committee said that in responding to the Towns subpoena, Bank of America left out documents related to Towns' loan.

• Rep. Elton Gallegly, R-Calif.

• Top staff members of the House Financial Services Committee.

• A staff member of Rep. Ruben Hinojosa, D-Texas, a member of the Financial Services Committee.

• Former Rep. Tom Campbell, R-Calif.

• Former Housing and Urban Development Secretaries Alphonso Jackson and Henry Cisneros; former Health and Human Services Secretary Donna Shalala. The VIP unit processed Cisneros' loan after he joined Fannie's board of directors.

• Former heads of Fannie Mae James Johnson, Daniel Mudd and Franklin Raines. Countrywide took a loss on Mudd's loan. Fannie employees were the most frequent recipients of VIP loans. Johnson received a discount after Mozilo waived problems with his credit rating.

Report: Countrywide used loans for influence 07/06/12 [Last modified: Friday, July 6, 2012 12:14am]

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