New report ties lawmakers to financial perks

Eileen Foster, a former Countrywide vice president, says she tried to warn the company that mortgage fraud was rampant, but was fired for speaking out. CBS

Red flags at Countrywide
(CBS News) A report out Thursday issued by House Oversight and Government Reform Chairman Darrell Issa, R-Calif., shows the extent to which subprime mortgage lender Countrywide Financial used its VIP loan program to influence hundreds of people responsible for overseeing mortgage markets - including members of Congress, their staff members, cabinet secretaries and their employees and key executives at mortgage giant Fannie Mae.

The report showed at least six members of Congress from both parties benefited from VIP loans issued by Countrywide. The lawmakers names were previously reported, but the new report makes it clear that at least some recipients of the special loans must have known they were receiving VIP treatment since letters confirming the terms specifically said "From-Countrywide VIP Unit."

The report states that the benefits of getting a VIP loan included a half-point off the interest rate and the waiving of junk fees that ranged from $350 to $400. It also revealed that in the period leading up to the subprime mortgage meltdown, Countrywide launched 70 lobbyists on the House Financial Services Committee alone to fight off new subprime lending rules and new regulations governing Government Sponsored Enterprises like Fannie Mae. No legislation ever passed out of the committee. Countrywide, on the verge of collapse, was bought by Bank of America in 2008.

Fannie Mae was the number one buyer of Countrywide's bad subprime loans and eventually needed to be bailed out by U.S. taxpayers. Fannie Mae executives receiving loans included chairmen James 'Jim' Johnson, Franklin Raines, and Daniel Mudd.

Recipients of the special mortgage deals include then-Senate Banking Chairman Chris Dodd, D-Conn., and the current Senate Budget Chairman Kent Conrad, D-N.D.. Another recipient was Rep. Edolphus Towns, D-N.Y., who was chair of the House Oversight Committee when news of the special VIP program first broke. Towns insisted he had done nothing wrong and started the initial Countrywide probe and issued subpoenas to Bank of America for information, but did not specifically ask for names of members of Congress who'd received the favorable loans.

Rep. Howard "Buck" McKeon, R-Calif., was another recipient of a VIP Countrywide loan in 1998. The company CEO, Angelo Mozilo, personally demanded that the company waive fees and lowering of points. The report shows that a letter included in McKeon's loan documents specifically said "thank you for allowing Countrywide's VIP team to assist you with your financing needs..." The letter is also signed by "The VIP Team."

McKeon's communications director Alissa McCurley said in an emailed statement to CBS News that "Mr. McKeon has been completely upfront and transparent about his loan. He was never aware of any Friends of Angelo designation, and he has provided the media all his loan documentation from the 1998 loan. Mr. McKeon shares Chairman Issa's interest in determining if there was any wrongdoing by Countrywide."

Rep. Pete Sessions, R-Tex., who took out a loan with Countrywide, has always maintained that he specifically stated he did not want special treatment. Today's report confirms that he did not receive a VIP discount on his loan.

At least two cabinet members received VIP loans as well, Alphonso Jackson and Henry Cisneros. Both are former secretaries of the Housing and Urban Development Agency which is the executive arm responsible for overseeing the Housing market.

The Oversight and Government Reform Committee has referred all recipients of the VIP loans to the House and Senate ethics committees for further investigation. Aides say they doubt the Justice Department will take any action against loan recipients despite the possibility that the loans could be considered bribes. Oversight committee Republicans do not go so far as to call the special loans bribes nor do they characterize any of the behavior as illegal though they suggest Countrywide lobbyists may have gotten around bribery laws by keeping details of the VIP program internal to the company.

  • Jill Jackson On Twitter»

    Jill Jackson is a CBS News senior political producer.

Comments

Watch CBSN Live

Watch CBS News anytime, anywhere with the new 24/7 digital news network. Stream CBSN live or on demand for FREE on your TV, computer, tablet, or smartphone.