Countrywide won influence with loans

WASHINGTON - Countrywide Financial Corp. gave discount loans to former and current members of Congress and executives at Fannie Mae as it lobbied to scuttle legislation that would have diminished its sale of sub-prime mortgages, said a report released Thursday by House Oversight and Government Reform Committee Chairman Darrell Issa, R-Calif.

The report, which caps a three-year inquiry into the company whose subprime loans helped start the nation's foreclosure crisis, concluded that between 1996 and 2008, Countrywide executives used a VIP loan program to try to stop legislation that would have restrained the company's business with Fannie Mae. The government-sponsored mortgage company was responsible for buying a large volume of Countrywide's subprime mortgages.

"This report sheds new light on Countrywide's relationship with Fannie Mae and how Countrywide used its VIP program to cement its ties to its taxpayer-backed business partner," Issa said. "Other than Countrywide, no other entity's employees received more VIP loans than Fannie Mae."

The report contained new details about the lengths to which bank executives were willing to go to accommodate Fannie Mae leaders. Jim Johnson, chief executive officer of Fannie Mae from 1991 to 1998, earned $100 million at the company. But bank employees expressed concern about giving him a loan because he didn't pay his bills regularly and had a low credit score, said e-mails published in the report.

But Countrywide CEO Angelo Mozilo, who had a close relationship with Johnson, instructed his employees to give Johnson a loan " 1/2 below prime." "Don't worry about" the credit score, Mozilo wrote. "He is constantly on the road and therefore pays his bills on an irregular basis but he ultimately pays them."

In another e-mail, Mozilo wrote, "Jim Johnson continues to be a source of many loans for our company and this is just a small token of appreciation for the business that he sends to us."

Countrywide was taken over by Bank of America in January 2008, relieving regulators from the task of cleaning up the bankruptcy of a company that was servicing 9 million U.S. home loans worth $1.5 trillion. The Justice Department has not prosecuted any Countrywide official, but the report said documents and testimony show that Mozilo and lobbyists "may have skirted the federal bribery statute by keeping conversations about discounts and other forms of preferential treatment internal."

The Securities and Exchange Commission in October 2010 slapped Mozilo with a $22.5 million penalty to settle charges that he and two other former executives misled investors as the subprime mortgage crisis began. Mozilo also was banned from ever again serving as an officer or director of a publicly traded company. He also agreed to pay another $45 million to settle other violations.