"How A Notorious Subprime Lender Used VIP Loans To Influence Public Policy"
The House Oversight and Government Reform Committee today released results of an investigation into how Countrywide, the mortgage lender that blew itself up in 2008 and was pushed into the waiting arms of Bank of America, used a VIP loan program to influence public policy, including anti-predatory lending legislation. Countrywide was the worst offender in proliferating subprime loans, according to a Center for Public Integrity investigation.
According to the Oversight Committee’s report, Countrywide’s aim with the VIP program was to essentially purchase insurance against predatory lending laws and legislation that would have prevented the government from purchasing Countrywide’s subprime loans. “Documents obtained by the Committee show that several Members of Congress and congressional staff positioned to affect the legislation received VIP loans. In fact, Countrywide lobbyists — and CEO Angelo Mozilo himself — referred several Members and staff from the Senate Committee on Banking and the House Committee on Financial Services to the VIP unit,” the report says. Here are the most important takeaways from the report:
– Countrywide’s VIP unit recorded 17,979 loans between January 1996 and June 2008 (though some were double counted), and “borrowers included Members and employees of Congress, the White House, Fannie Mae, Freddie Mac, federal agencies, and other government entities.”
– Countrywide explicitly handed out these loans, and had them handled by the same California desk that dealt with loans to celebrities, in order to “create a favorable impression of the company on Capitol Hill.”
– Countrywide gave preferential loans to Congressional staff members charged with working on anti-predatory lending legislation. One email between Countrywide staffers instructed that VIP client be handled “carefully” because she “reports directly to Congressman Mel Watt who introduced predatory lending legislation to address unscrupulous lending practices.”
– The standard mortgage reduction on a VIP loan was 0.5 points, and Countrywide “routinely waived junk fees typically ranging from $350 to $400 for VIP borrowers.”
– Countrywide was so intent on proliferating these VIP loans, that it even took a loss on them, including on a loan to former Fannie Mae President and CEO Daniel Mudd.
The report did not name any new members of Congress who had received loans, beyond the six who had previously been uncovered. According to the documents, Mozillo denied using the program to influence public policy. “I personally was proud to have people of prominence select Countrywide to be their lender of choice,” he said.