The Countrywide VIP Program wrote nearly 18,000 sweetheart mortgages to congressmen and policymakers at Fannie Mae, Freddie Mac and other federal agencies, according to a report released Thursday by the government oversight committee.

"The Committee's investigation found Countrywide lobbyists and CEO Angelo Mozilo used discounted loans as a tool to ingratiate itself with policymakers in an effort to benefit the company's business interests," said committee Chair Rep. Darrell Issa, R, Calif. "A former lobbyist for Countrywide testified that members of Congress, staff, and other government officials were directed to the company's VIP program as part of an effort to create a favorable impression of the company on Capitol Hill."

The "Friends of Angelo" unit began operation in 1991 to process loans for Countrywide executives and their friends. It widened in January 1996 and operated through June 2008 to pool influence from Washington, according to the report.


The committee sifted through more than 120,000 documents submitted by Bank of America (BAC) after subpoenas more than one year ago from former committee Chair Rep. Edolphus Towns, D-N.Y. and Issa. BofA bought Countrywide in 2008. The investigation moved steadily over the past year but finally revealed the scope of the program's influence in the detailed report.

According to the documents, loans with special interest rates and terms went to a dozen members of Congress and their staff including: Former Sen. Chris Dodd, D-Conn., Sen. Kent Conrad, D-N.D., Reps. Howard McKeon, R-Calif., Elton Gallegly, R-Calif., and Tom Campbell, R-Calif. Emails from Rep. Pete Sessions, R-Texas, showed he asked Countrywide not to give him favorable terms on his mortgage.

Former Countrywide lobbyist Jimmie Williams also told the committee he referred Rep. Gregory Meeks, D-N.Y., and former Rep. Bob Ney, R-Ohio.

Lobbyists from other groups, including the Mortgage Bankers Association referred some of the lawmakers to the program. Mozilo served as president of the MBA from 1991 to 1992.

While many of the congressmen issued past statements they had no knowledge of the program or the preferential treatment to their home loans, documents showed otherwise.

An October 2008 comment sheet from Joseph Reed, who worked in the VIP unit and helped process McKeon's loan states:

"FOA [Friends of Angelo] referral, Please order appraisal ASAP. You may call the borrower at his Washington office [number redacted] and get the Sons phone number for the appraiser contact. The borrower would like to hear from the appraiser this week. The borrower is a bit difficult to deal with. He seems on the edgy side."

Fannie and Freddie

According to the report, the VIP unit wrote sweetened mortgages for Fannie Mae senior executives in exchange for inside information.

Fannie offered Countrywide "improved pricing for investor loan products... to offer an execution that is more competitive with private label execution," according to an April 2005 email from Dave Battany, the former director of single family business at Fannie, to David Spector, an executive at Countrywide.

Fannie also provided "a valuable heads up" on changes in policy as well.

"The above policy is not public, and you should be the first in the country to know this information," Battany said in an April 2005 email to Countrywide Chief Finanicial Officer John McMurray. "Please do not share this information outside of Countrywide at this time."

Former Fannie CEOs Jim Johnson, Franklin Raines, Daniel Mudd and executive Jamie Gorlick, all received preferential loans, according to the report documents.

Raines, whom Mozilo despised, received five loans under the program, according to the report. In March 2003, Raines received a free float down to a lower interest rate on a refinancing, meaning the usual fees for such a transaction were waived.

Scores of other employees at the GSEs received treatment as well, according to the documents.

Fannie refused to comment, and a spokesman for Freddie did not immediately reply to requests for one.

"Other than Countrywide, no other entity's employees received more VIP loans than Fannie Mae," Issa said. "Even as Countrywide's CEO Mozilo mocked Fannie Mae and top executives for its crony capitalism business model, he would nonetheless personally intercede to ensure executives had access to discounted Countrywide loans. These relationships helped Mozilo increase his own company's profits while dumping the risk of bad loans on taxpayers."

Blocking reform

Countrywide and GSE lobbyists cashed in their political capital to block GSE reform between 2000 and 2005 in both the Senate and the House of Representatives, documents show.

Members of staff with ties directly to the Senate Banking Committee received VIP home loans during this time. One staffer for former Sen. Robert Bennett, R-Utah, and senior member of the banking committee, received eight loans.

In 2004, the Senate Banking Committee considered a bill that would force the GSEs to maintain larger capital reserves and other safeguards.

During one meeting in early 2005 with Fannie lobbyists, Senator Bennett demonstrated support for terms favorable to Fannie Mae, according to an email obtained by Issa's investigation.

GSE reform legislation adopted by the Senate Banking Committee never came to a vote in 2005.

"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," according to the report.

As of March 31, the GSEs drew more than $189.5 billion in bailouts from the Treasury Department. It will take more than a decade to pay it back, if ever.