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Countrywide’s loans bought clout on Hill
House report faults ‘VIP’ treatment
Question of the Day
Countrywide Financial Corp., the former mortgage lending giant whose subprime loans helped spark the country’s foreclosure crisis, bought influence on Capitol Hill by giving discounted loans to lawmakers and key policymakers, according to a nearly four-year House-led investigation that wrapped up this week.
Countrywide, which was acquired by Bank of America after its spectacular crash in 2008, earned political clout by awarding preferential loans to at least a half-dozen lawmakers, including former Senate Finance Committee Chairman Christopher J. Dodd, Connecticut Democrat, and Senate Budget Committee Chairman Kent Conrad, North Dakota Democrat, along with top officials at Fannie Mae, a major purchaser of its subprime mortgages, according to the report by the House Oversight and Government Reform Committee.
Oversight Chairman Darrell E. Issa, California Republican, said that gave the company broad influence with lawmakers who had critical roles in legislation that could have reformed Fannie Mae and Freddie Mac and cracked down on predatory lending.
“Documents and testimony obtained by the committee show the VIP loan program was a tool used by Countrywide to build good will with lawmakers and other individuals positioned to benefit the company,” the committee wrote in a report released Thursday.
The lawmakers named in the report have denied that they knew they were being given preferential treatment, even though they accepted what the company called “VIP” loans Countrywide typically gave only to members of its board of directors and their friends.
Dodd spokesman Bryan DeAngelis said the report “recycles old allegations,” pointing to a probe by the Senate Ethics Committee, which cleared Mr. Dodd and Mr. Conrad of all charges after looking into the matter. The House Ethics Committee has also looked into the loan questions, but has yet to act.
“The Senate Ethics Committee found that the rates and terms Mr. Dodd, who has since retired, received were widely advertised and available to other borrowers,” Mr. DeAngelis said. “When questions were first raised about his loans, Mr. Dodd was clear in saying he became a Countrywide customer back in 1999.”
Once the country’s largest mortgage lender, Countrywide collapsed under the pressure of spiking defaults and foreclosures, especially in the subprime market where it had been a market leader.
According to documents subpoenaed by Mr. Issa’s committee, Countrywide’s VIP unit processed loans for 30 Senate employees, 10 House employees and seven members of Congress — three Democrats and four Republicans.
One of those, Rep. Pete Sessions, Texas Republican, said he specifically requested not to be given a VIP loan, and the committee found that Countrywide agreed. Another Republican named in the report, California Rep. Elton Gallegly, said he wasn’t aware of any preferential treatment for one Countrywide loan he received in 2004.
Also named in the report was Rep. Edolphus Towns, New York Democrat, who was serving as Oversight Committee chairman when Congress launched an investigation. While Countrywide has said the VIP program is for customers with outstanding credit history, it ignored Mr. Towns‘ low credit score in order to process his loan quickly, the report said.
Spokesman Charles Lewis dismissed the report, saying that Mr. Towns wasn’t aware of any special favors.
“This report does not alter his assertion that he did not knowingly receive any preferential treatment,” Mr. Lewis said.
Mr. Conrad rejected charges that he receive preferential treatment, saying he and his wife were already good customers for any lender.
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