Both House and Senate Ethics committees have looked into the Countrywide VIP loans. | REUTERS Issa report: VIP loans brought influence

Failed mortgage company Countrywide Financial used a VIP program — including loans to lawmakers, key congressional staffers and executive-branch officials — to help the company wield influence and block legislation that would have cut into its profit margin, according to a House investigation.

Countrywide also gave VIP loans to top officials at Fannie Mae, the government-sponsored mortgage giant, according to a new report by the House Oversight and Government Reform Committee, chaired by Rep. Darrell Issa (R-Calif.).


More than a half a dozen current and former lawmakers, including Senate Budget Committee Chairman Kent Conrad (D-N.D.) and House Armed Services Committee Chairman Buck McKeon (R-Calif.), obtained mortgages through the Countrywide VIP program, in some cases saving thousands of dollars, according to the Issa report, set for release Thursday.

Countrywide and Fannie Mae formed a strategic partnership in 1999. Former Fannie Mae CEO James Johnson, a well-known figure in Democratic Party circles who helped forge the close relationship with Countrywide, received more than $10 million in VIP loans. Fannie Mae’s collapse and subsequent bailout has cost U.S. taxpayers $93 billion-plus.

Officials at Freddie Mac, another mortgage-related Government-Sponsored Enterprise, received Countrywide VIP loans as well. Freddie Mac’s bailout has cost an additional $53 billion.

Other lawmakers who received Countrwide VIP loans include former Sen. Christopher Dodd (D-Conn.), Rep. Edolphus Towns (D-N.Y.), Rep. Pete Sessions (R-Texas), Rep. Elton Gallegly (R-Calif.) and former Rep. Tom Campbell (R-Calif.). Dodd, who chaired the Senate Banking Committee, was identified as a Countrywide VIP going back to 1999, and he even referred an aide to a former GOP senator to the same program, Issa’s probe found.

While the idenities of the lawmakers who received the VIP loans have been public for years — and all vehemently dispute that they received or were aware of getting any special treatment — Issa asserts that the efforts by Countrywide and its former CEO, Angelo Mozilo, to woo political power brokers played a critical part in blocking legislation that would have reformed the mortgage industry, specifically the roles played by the Fannie Mae and Freddie Mac in the U.S. housing bubble of the mid-2000s.

“Documents and testimony obtained by the Committee show the VIP loan program was a tool used by Countrywide to build goodwill with lawmakers and other individuals positioned to benefit the company. A Countrywide lobbyist described the VIP program as a means to create a favorable impression of the company on Capitol Hill,” states a draft copy of the Oversight and Government Reform Committee report that was reviewed by POLITICO.

“Documents and testimony show that Angelo Mozilo and Countrywide’s lobbyists may have skirted the federal bribery statute by keeping conversations about discounts and other forms of preferential treatment internal. Rather than making quid pro quo arrangements with lawmakers and staff, Countrywide used the VIP loan program to cast a wide net of influence.”

The report adds: “Countrywide’s effort to build goodwill on Capitol Hill worked. Countrywide became a trusted adviser and was consulted when the House Financial Services Committee and the Senate Banking Committee considered GSE reform and predatory lending legislation. If Countrywide’s lobbyists, and Mozilo himself, were more strictly prohibited from arranging preferential treatment for Members of Congress and congressional staff, it is possible that efforts to reform the GSEs would have been met with less resistance.”

Under congressional ethics rules and federal law, government officials are prohibited from accepting special deals not available to ordinary citizens. Both the House and Senate Ethics committees have looked into the Countrywide VIP loans. Dodd and Conrad were cleared of any wrongdoing by the Senate panel, while the House Ethics Committee has taken no action so far.

According to Issa’s report, preferential treatment given to Conrad by Countrywide on two loans — a vacation home in Delaware and a small apartment building in North Dakota — saved the Democrat more than $20,000 beginning in 2002.

Conrad, however, was cleared by the Senate Ethics Committee of any wrongdoing in his dealings with Countrywide, although the panel said in an August 2009 statement that the North Dakota Democrat “should have used exercised more vigilance in your dealings with Countrywide in order to avoid the appearance that you were receiving preferential treatment based on your status as a Senator.”

Conrad denied knowing initially that he was part of the VIP program — known informally as “Friends of Angelo” inside Countrywide — and pointed out his loans were in line with prevailing market rates at the time.

“The Senate Ethics Committee concluded unanimously, Republicans and Democrats, that I did not receive any sweetheart deal on any transaction,” Conrad said in an interview with POLITICO. “Darrell Issa can put out whatever report he wants to put out, but this has all been totally reviewed by the Senate Ethics Committee.”

Conrad also disputed the size of the potential savings as estimated by Issa’s panel. Conrad refinanced the loans with another financial institution once the Friends of Angelo scandal broke in 2008.

“They’re wrong, they’re wrong,” Conrad added. “Most importantly, their calculations are based on what the savings would be were based on the [15-year] life of the loan … I never had the loan for 15 years.”

McKeon has publicly declared that he was not aware of his VIP status with Countrywide. McKeon got a $315,000 loan from Countrywide in Oct. 1998, with Mozilo personally ordering the waiver of mortgage points and processing fees. McKeon was not required to provide proof he could repay the loan. McKeon received the loan even as a small business he retained a financial stake in was going into bankruptcy.

Yet documents obtained by Issa show the loan application packet sent to McKeon and his wife in Oct. 1998 clearly stated that the California Republican was a special customer. “Thank you for allowing COUNTRYWIDE’s VIP TEAM to assist you with your financing needs on the above referenced property,” states an Oct. 7, 1998, cover letter to the loan documents sent to McKeon. The letter came from the “VIP TEAM” at Countrywide.

A McKeon spokesman reiterated the GOP lawmaker’s position that he got no preferential or special treatment on the VIP loan.

“Mr. McKeon has been completely upfront and transparent about his loan,” said Alissa McCurley in a statement to POLITICO. “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.”

Towns, a former chairman of the Oversight panel who subpoenaed Countrywide over the VIP program, received two Countrywide loans worth more than $376,000 despite a poor credit record, which the New York Democrat blamed on the 2001 anthrax attacks on Capitol Hill, according to Countrywide emails. Towns said he was not aware of receiving any preferential treatment from the company.

According to Issa’s report, Sessions — now the chairman of the National Republican Congressional Committee — specifically requested that he not get any special handling by Countrywide, the only lawmaker reported to have done so.

Rep. Gregory Meeks (D-N.Y.) was referred to the Countrywide VIP program by one the company’s lobbyists but there is no record of any loan. Meeks is under investigation by the House Ethics Committee for failing to disclose a personal loan from a businessman for several years.

Former Rep. Bob Ney (R-Ohio), who went to prison for his role in the Jack Abramoff scandal, was also referred to the VIP unit, but there is no evidence that he got a loan either.

Former Housing and Urban Development Secretary Alphonso Jackson was the recipient of several Countrywide VIP loans. Jackson asked a Countrywide lobbyist, Jimmie Williams, for help when Jackson’s daughter was seeking a second mortgage on a Texas property. This episode occurred shortly before Jackson was confirmed as HUD secretary in March 2004. Williams bragged about his relationship with Jackson to top Countrwide officials

Henry Cisneros, another HUD secretary, and Donna Shalala, former head of the Health and Human Services Department, received Countrywide VIP loans, although after leaving government service. Cisneros served on Countrywide’s board from 2001 to 2007.

Issa’s report also spells out for the first time that Hill staffers in critical positions for Countrywide, including aides on the House Financial Services and Senate Banking panels, obtained VIP loans. These loans started as early as 1998.

“Countrywide gave VIP loans to congressional staff who played a role in policy discussions that affected Countrywide. Staff with connections to the committees of jurisdiction for mortgage industry issues in the House and Senate received VIP loans from Countrywide,” Issa’s report states.

“Between 2000 and 2005, Fannie Mae and Freddie Mac committed their vast lobbying resources to defeating GSE reform legislation considered by the Senate Committee on Banking, Housing, and Urban Affairs and House Committee on Financial Services. Countrywide buttressed the efforts of Fannie’s lobbyists by connecting with key staffers through the VIP program.”

Clinton Jones III, currently the general counsel to the Financial Services Committee, got two VIP loans from Countrywide. An internal company email from a Countrywide lobbyist in Nov. 2002 in reference to Jones’s loan application noted that he was “an advisor to ranking Republican member of Congress responsible for legislation of interest to the financial services industry and of importance to Countrywide.”

A 2004 email from a lobbyist to then-Fannie Mae CEO Franklin Raines said Jones “has ‘the pen’” in drafting GSE-related legislation and “does not have the bias” against Fannie Mae that other staffers did under the committee’s former chairman, former Rep. Mike Oxley (R-Ohio).

Jones received Countrywide VIP loans worth more than $475,000, with certain fees waived, according to Issa’s report. Jones left the Financial Services Committee in 2007 to work for Fannie Mae, then returned to the panel the following year.

Jones could not be reached for comment at press time.

Other Hill aides who received VIP loans include a top aide to former Sen. Robert Bennett (R-Utah), then a member of the Banking Committee; a senior aide for Rep. Ruben Hinojosa (D-Texas), another Financial Services Committee member; and the director of the Congressional Hispanic Caucus, which had a high-profile role in mortgage legislation affecting minority groups.