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Countrywide VIP Loans To Fannie Mae Execs Are Under Investigation

Dennis Norman

Fannie Mae, after losing $59.8 Billion in 2008 and then $74.4 Billion in 2009, reported yesterday that things are looking up and they lost only $1.2 Billion in the 2nd quarter of this year. This “good” news comes on the heels of documents being released two weeks ago showing that Countrywide made, what appears to be, some “below-market” mortgages to employees of Fannie Mae under a VIP loan program. There have been allegations that perhaps this was done in exchange for favors.

On July 20, 2010 Congressman Darrell Issa, ranking member of the House of Representatives Committee on Oversight and Government Reform, wrote a letter to the General Counsel for the Federal Housing Finance Agency in which he revealed some of the information contained in the more than 44,000 pages of documents Countrywide had produced for his Committee as a result of a subpoena.

Highlights of the letter and documents produced:

  • According to the letter, there is evidence that Countrywide used the VIP loan unit to “give preferential treatment to individuals positioned to advance the company’s business interests.”
  • The number of loans to borrowers who worked at Fannie Mae spiked at two points during the lifetime of Countryside’s VIP program. The first spike came in 1998, as Countrywide was negotiating a volume discount with Fannie Mae, the second spike came in 2001-03, on the leading edge of a “mortgage boom that occurred from late 2002 through 2004” and an expansion of the VIP loan unit.
  • While negotiating the volume discount,“Countrywide CEO Angelo Mozilo leveraged his company’s position as the nation’s largest residential housing lender to extract a lower “guarantee fee” from Fannie Mae CEO Jim Jonson, who himself receive several Countrywide VIP loans.” (More than $10 Million worth of loans)
  • Additional Fannie Mae senior leaders received a series of VIP loans from Countrywide including:
    • Former CEO Franklin Raines
    • Former Fannie Mae Vice Chairman Jamie Gorelick
    • Former Fannie Mae COO Daniel Mudd
  • According to Issa’s letter, by accepting discounted loan terms and otehr preferential treatment from Countrywide, Fannie Mae employees may have violated the company’s code of conduct. Furthermore it may also be a criminal act.

This investigation by the committee began in 2008. On March 19, 2009 the committee produced a report title “Friends of Angelo: Countrywide’s Systematic and Successful Effort to Buy Influence and Block Reform.” It’s 63 pages long but worth the read……

CBS News did a report on this the day Issa’s letter came out. It gives some additional detail….

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