Friends of Angelo: Countrywide’s Systematic and Successful Effort to Buy Influence and Block Reform (PDF)
...In 1999, Fannie Mae CEO Jim Johnson and Countrywide CEO Angelo Mozilo reached a strategic agreement giving Fannie Mae exclusive access to many of the loans originated by Countrywide in exchange for a discount on fees Fannie charged when buying loans. The agreement linked the growth and success of Countrywide to Fannie Mae’s continued desire to acquire a large volume of loans....
...Because the growth and success of Countrywide was tied directly to Fannie Mae’s continued hunger for acquiring and holding loans and Wall Street’s continued investment in mortgage-backed securities composed of subprime mortgages, Countrywide CEO Angelo Mozilo offered a key group of VIPs preferential treatment through a special loan division. Countrywide gave preferential treatment to legislators, Congressional staff, cabinet members, Fannie Mae executives, lobbyists, and others well connected in Washington. Countrywide also gave preferential treatment to business partners, local politicians, homebuilders, entertainers and law enforcement officials....
...Countrywide’s VIP loan program was a tool with which Countrywide built its relationship with Congress and protected its relationship with Fannie Mae. Senior Countrywide officials and lobbyists openly and explicitly weighed the value of relationships with potentially influential borrowers against the cost to Countrywide in terms of forfeited fees and payments.
Countrywide’s Washington lobbyist Jimmie Williams identified influential borrowers for VIP treatment. Williams justified his referrals to the director of the VIP program by explaining the borrower’s position and how he or she could be valuable. Among others, Williams referred the Chief Counsel to the House Financial Services Housing and Community Opportunity Subcommittee Clinton Jones, HUD Secretary Alphonso Jackson’s daughter Annette Watkins, U.S. Rep. Melvin Watt’s Chief of Staff Joyce Brayboy, and former Democratic National Committee official and Director of White House Political Affairs under President Clinton Minyon Moore.
Countrywide loan officers waived fees and knocked off points for VIP borrowers at no cost, amounting to thousands of dollars in savings. Countrywide charged non-VIP borrowers hundreds of dollars in upfront fees. Non-VIP borrowers paid one percent of the total amount of the loan for an interest rate reduction of one point. In many cases, Countrywide facilitated and expedited the loan process for VIPs by ignoring company policies...
...Angelo Mozilo personally specified rates and fees for VIP borrowers. When the terms of a VIP loan violated Countrywide policy, Mozilo was notified and would personally authorize overrides. Mozilo substituted his familiarity with and the reputation of VIP borrowers for credit checks and reviews of debt and assets. According to the documents, no VIP borrower was ever given anything less than an “A-paper” loan.
Countrywide VIP account executive Robert Feinberg testified it was the practice of VIP loan officers to communicate to “Friends of Angelo” they were receiving special pricing and preferential treatment. Documents obtained by the Committee confirm this. VIP borrowers were informed Angelo Mozilo personally priced their loans and they relied on their status as “Friends of Angelo” to guarantee preferential treatment for themselves and others. Borrowers previously processed through the VIP department expected discounts on subsequent refinances. In case a borrower had any doubt about which department was processing a loan, Countrywide loan officers attached business cards to loan documents clearly indicating the officers processing the loan worked in the VIP unit....
...Listed below are individuals with primary responsibility to determine how Fannie and Freddie would be administered who also received or were offered benefits through the VIP program:
Senator Kent Conrad, Chairman of the Budget Committee and a Member of the Finance Committee, for whom Mozilo instructed the VIP loan department to “Take off 1 point”;
Senator Christopher Dodd, Member of the Committee on Banking, Housing and Urban Affairs (elevated to Committee Chairman in 2007), who saved approximately $75,000 by refinancing his home at a reduced rate;
Senator John Edwards, Member of the Judiciary Committee, who was referred to the “Friends of Angelo” program when trying to finance the purchase of a $3.8 million home in Georgetown;
Alphonso Jackson, Secretary of Housing and Urban Development, who received two loans through the VIP program, and whose daughter was referred to the VIP program by a Countrywide lobbyist;
James “Jim” Johnson, former Fannie Mae CEO and adviser to the presidential campaigns of John Kerry and Barack Obama, whose loans were priced personally by Mozilo at discounted rates.
Clinton Jones III, senior counsel of the House Financial Services Subcommittee on Housing and Community Opportunity, who was referred for “specialized handling” to the “Friends of Angelo” program by a Countrywide lobbyist, resulting in “.5 off and no garbage fees”;
Franklin D. Raines, CEO of Fannie Mae, for whom Countrywide’s VIP loan division applied a discount of “1 point off, no junk” to a $1 million refinance in response to a phone call from his secretary stating “per Angelo, Frank needs to refi.”
This group, members of which were able to directly influence the debate about how to reform the GSEs and the mortgage originators, represents the most flagrant attempt by Countrywide to buy a voice in the debate.
