House Details Countrywide VIP Mortages Given to Fannie Execs
[Update 1: adds agency comment] An ongoing investigation by a House of Representatives committee revealed a VIP lending unit at Countrywide Financial Corp. targeted senior leadership at Fannie Mae. The House Committee on Oversight and Government Reform obtained new documents that show former Fannie CEO Jim Johnson and his successor Franklin Raines, former vice chairman Jamie Gorelick and former chief operating officer Daniel Mudd received VIP loans from Countrywide. The investigation, ongoing since October 2008, indicates Countrywide "used its VIP loan unit to give preferential treatment to individuals positioned to advance the company's business interests," according to letter from the Committee, penned this week by Rep. Darrell Issa (R-CA), to the Federal Housing Finance Agency (FHFA). "By accepting discounted loan terms and other preferential treatment from Countrywide, Fannie Mae employees may have violated the company's code of conduct," Issa wrote in the letter. "The code of conduct puts Fannie Mae employees on notice that accepting 'inappropriate gifts' is a violation of the code of conduct and may also be a criminal act." To date, Bank of America (BAC) -- Countrywide's acquirer -- produced more than 44,000 pages of documents under subpoena by the Committee. These documents linked 153 VIP loans to borrowers employed by Fannie and another 20 VIP loans to borrowers employed by Freddie Mac. The Committee noted two spikes in the volume of VIP loans to Fannie and Freddie employees: one in 1998 as Countrywide negotiated a deal to sell billions of dollars in mortgages to Fannie at a discount. The second spike in the volume of VIP loans to Fannie employees occurred from 2001 to 2003 on the leading edge of a mortgage boom that lasted from 2002 to 2004. "I call this information to your attention so that the Federal Housing Finance Agency (FHFA) can fulfill its obligation as conservator of the [government-sponsored enterprises]," Issa said in the letter. "In the absence of an Inspector General at FHFA, it is my understanding that the Office of the General Counsel is performing certain investigative functions." A Fannie spokesperson could not return a request for comment, but an FHFA spokesperson told HousingWire the Agency received the House Committee's inquiry "and will respond promptly." Freddie could not comment on specifics, but a spokesperson said "we have an employee code of conduct that says employees can't solicit or accept discount prices or more favorable loan terms on the basis of their status as a Freddie Mac employee." Write to Diana Golobay. Disclosure: the author holds no relevant investments.