The mortgage company Countrywide Financial used a VIP program to give preferential treatment to members of Congress, Capitol Hill staffers and senior government officials, according to a report released Thursday by the House Oversight and Government Reform Committee.
The committee, chaired by Republican Rep. Darrell Issa (Calif.), issued a 114-page report finding that the Washington lobbyist for the failed mortgage company routinely referred high-profile D.C. clients to a VIP office within the firm, which gave them, in some instances, thousands of dollars in discounts off their mortgages.
Among the lawmakers receiving VIP loans were Sen. Kent Conrad (D-N.D.), former Sen. Chris Dodd (D-Conn.), Rep. Buck McKeon (R-Calif.), Rep. Edolphus Towns (D-N.Y.) and a senior staffer for former Sen. Bob Bennett (R-Utah). Rep. Pete Sessions (R-Texas) also had a loan processed by Countrywide's VIP team, but did not receive a discount at his request.
The report said its finding contradicted claims made by Dodd that he was not aware he received special treatment from Countrywide, while it confirmed an assertion by Sessions, the chairman of the House GOP’s campaign arm, that he specifically requested not to receive a discounted rate from the firm.
Dodd said in 2008 that he learned of the VIP program years before, but maintained he was unaware of receiving any special deals as a result of it. Issa's report found that Dodd did receive a discount on at least one loan. The Senate Ethics Committee eventually cleared both Dodd and Conrad of any violations for the loans, but said they should have questioned their place in the VIP program.
The report found that in total, the Countrywide VIP unit made 29 loans to 12 different members of Congress and staff.
Current and former members reportedly tied to the VIP program have repeatedly aired their innocence, saying they were not aware of receiving any special treatment from Countrywide.
But Issa's report details multiple examples when members or their spouses received paperwork from Countrywide that specifically stated they were participating in a VIP program.
For example, a spokesman for House Armed Services Chairman McKeon reportedly said in February the congressman was unaware of any special program, but Issa’s report found documents sent to McKeon’s home thanking him for participating in the VIP program.
Dodd has maintained he never sought out special treatment form Countrywide. Issa’s report found Dodd received discounts on two home loans, and that Dodd’s wife was notified they were receiving service through a VIP program.
The report also found that Sessions specifically worked to ensure he did not receive special treatment from Countrywide when he went to them for a home loan in 2007.
Emails sent by Countrywide officials show that Sessions did not receive a discount “due to the fact that [he] is an elected official.”
Beyond lawmakers, the report found Countrywide doled out VIP treatment to other influential Washington figures, including two former secretaries of the Department of Housing and Urban Development. It also found that the lender actually took a loss on a loan made to the former head of Fannie Mae, Daniel Mudd, who is now facing charges of securities fraud along with other former GSE officials for downplaying to investors their exposure to risky subprime loans in the build-up to the housing crisis.
Issa wrapped up the report by saying Congress should consider making it illegal for companies to offer discounts or other types of preferential treatment to members of Congress or their staff, adding that such a ban should apply not just to mortgage lenders, but car dealers, jewelry stores and any other company that offers financing opportunities.
He added that when members of Congress or their staff enter into any complex financial transaction they should follow Session's lead, saying up front that they should not receive discounts.
Bank of America purchased the troubled mortgage lender in 2008 for $2.5 billion. Through a combination of losses on real estate holdings, legal expenses, and settlements with state and federal regulators, the acquisition has cost the bank over $40 billion, according to The Wall Street Journal.
Countrywide's former CEO, Angelo Mozilo, who helmed the lender's “Friends of Angelo” program, has also faced tough times. In 2010, he paid a record $22.5 million penalty to the Securities and Exchange Commission (SEC) to settle charges he and other ex-Countrywide officials misled investors and the subprime mortgage crisis developed. He is also barred from ever again serving as an officer or director of a public company.
This story was posted at 9:21 a.m. and last updated at 5:23 p.m.