Employees at Fannie Mae and Freddie Mac — including top executives — received 173 cut-rate loans from Countrywide Financial, according to a congressional probe, the latest accusation that the lender tried to curry influence with people in power.
A Republican-led investigation revealed that Fannie Mae employees — including an assistant to the CEO, a government relations lobbyist and a vice president for sales — received 153 favorable loans, while 20 VIP loans were issued to employees at Freddie Mac. Countrywide Financial collapsed in the 2008 housing meltdown and was swallowed by Bank of America, but its connections to powerful political figures continue to reverberate in Washington.
These are the same type of special loans that created an ethics controversy for Democratic Sens. Kent Conrad of North Dakota and Chris Dodd of Connecticut. The senators were accused of getting VIP mortgages because of their political positions but were later cleared by the Senate Ethics Committee.
Republican investigators believe the preferential treatment on the loans ranges from slashing interest rates and waiving third-party fees to giving enhanced customer service.
The investigation has also uncovered potential evidence that Countrywide was offering bad loans, which would lose money, to influential people at Fannie Mae. An e-mail, obtained by POLITICO, shows Countrywide employees discussing the refinancing of the loan of former Fannie Mae Chief Operating Officer Daniel Mudd, acknowledging the sensitivity and potential for financial loss.
“Make sure the branch … understand[s] the sensitivity of this deal,” the e-mail to former Countrywide Vice President Daniel Rector reads. “We are already taking a loss, it would be horrible to add a service complaint on top and lose any benefit we generate.”
Special-rate loans might violate Fannie Mae’s code of conduct, which prohibits discounted loans, according to a letter summarizing the investigation’s results.
The report redacted most of the names of employees who received VIP loans.
The investigation, headed by Reps. Edolphus Towns (D-N.Y.) and Darrell Issa (R-Calif.), also identifies Fannie Mae CEO Jim Johnson, the company’s former CEO, Franklin Raines, former Vice Chairwoman Jamie Gorelick and Mudd as having received loans as part of the “Friends of Angelo” program — named for former Countrywide CEO Angelo Mozilo. The executives were previously identified as being part of the embattled lender’s loan program but have denied knowing that they had been singled out by the lender. Johnson alone received $10 million in loans, according to the letter.
The information was uncovered as part of a wider investigation into Countrywide Financial by the House Oversight and Government Reform Committee. Issa, the panel’s top Republican, and Towns, its chairman, subpoenaed Countrywide for records dealing with the VIP loan program in October 2009.
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