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Countrywide Gave Special Attention To Lawmakers
Lender's Chief Executive Offered Incentives to VIPs

By Jonathan Weisman and Dina ElBoghdady
Washington Post Staff Writers
Saturday, June 14, 2008

In 2004, Sen. Kent Conrad was hunting for a lender for a $1.07 million mortgage on his vacation home in Bethany Beach, Del., when an old friend handed him the phone number of Angelo Mozilo.

Conrad (D-N.D.) said yesterday that he sees nothing wrong with calling Mozilo, the chief executive of the nation's largest mortgage lender, Countrywide Financial. And the Senate Budget Committee chairman is adamant that he received no special deals.

But by reaching out to Mozilo, Conrad became another VIP enrolled in the "FOA" -- Friends of Angelo -- loan program.

"[T]ake off 1 point," Mozilo instructed a subordinate in a March 17, 2004, e-mail obtained by Condé Nast Portfolio magazine. In another e-mail that April about a Conrad loan, Mozilo wrote: "Make an exception due to the fact that the borrower is a senator."

Before his company's fall from grace, Mozilo looked for influence in Washington however he could get it, through campaign contributions, high-priced lobbyists and easy lending, not just to power brokers but even to financial journalists. Savings offered under the FOA program do not appear to amount to more than a few hundred or thousand dollars.

But as Countrywide emerged this year as a leading player in the subprime mortgage crisis, Mozilo turned politically radioactive, held up by politicians as the personification of a housing meltdown that has shaken financial markets worldwide.

Last month, a federal judge in Los Angeles gave the go-ahead to a lawsuit filed by Countrywide shareholders, who say that the company made bad loans and misled its investors. Mozilo was hauled up before a congressional committee in March to defend his compensation package, which dropped 79 percent last year to $10.8 million but was supplemented by $121.5 million in exercised stock options.

The FOA program has only recently surfaced. Conrad received Mozilo's phone number from former Fannie Mae chief executive James A. Johnson, who was chased from his job vetting potential running mates for presumptive Democratic presidential nominee Barack Obama just four days after the Wall Street Journal reported that Johnson may have received preferential treatment on his own Countrywide loans.

Some familiar with Mozilo's practices say he made no secret of the incentives. "It was something he handed out like party favors. He was fairly forthcoming with it," said Guy Cecala, publisher of Inside Mortgage Finance Publications. "As long as I can remember, he was offering that."

The Portfolio investigation alleges that favorable loans also were extended to Senate Banking Committee Chairman Christopher J. Dodd (D-Conn.); President Bush's former housing secretary, Alphonso Jackson; former United Nations ambassador Richard Holbrooke; and former Health and Human Services secretary Donna E. Shalala.

"Angelo asked me to ensure that we 'knock her socks off' with our great service," a Countrywide executive wrote of Shalala's application in an Aug. 20, 2002, e-mail, according to Portfolio.

"Look for these," a Countrywide manager wrote in a Sept. 27, 2002, e-mail, after receiving applications from Kati Marton, Holbrooke's wife. "These loans are incredibly important to Angelo and as such they are incredibly important to us."

Holbrooke, Shalala and Jackson did not return phone calls seeking comment. But Conrad and Dodd, both of whom have committee jurisdictions that affect Countrywide, yesterday dismissed the notion that they received favorable deals, and they said they did not know that the FOA loan category existed.

"I was never told I was given preferential treatment. I didn't ask for it, didn't seek it, and as far as I know, I didn't get it," Conrad said.

"As a United States senator, I would never ask or expect to be treated differently than anyone else refinancing their home," Dodd said in a statement.

Bryan DeAngelis, a spokesman for Dodd, said neither the senator nor his wife ever spoke to Mozilo about their loans.

The senators' mortgage rates appear to be at or even above the prevailing rates at the time. Conrad received a 4.875 percent rate on a 15-year mortgage in April 2004 for his beach house and a 5.75 percent rate on a $96,000 mortgage in July 2004 on an eight-unit apartment building in Bismarck, N.D.

Conrad said he has never sought "points," an upfront charge paid to lenders in exchange for a lower interest rate over the life of the loan. He said he was baffled by Mozilo's e-mail instructing the loan officer to "take off 1 point."

Dodd borrowed $506,000 at 4.25 percent to refinance his Washington townhouse and $275,042 at 4.5 percent to refinance a home in East Haddam, Conn., according to Portfolio. Quoting internal documents, the magazine said Countrywide waived three-eighths of a point, or about $2,000, on the first loan and a quarter of a point, or $700, on the second.

"When my wife and I refinanced our loans in 2003, we did not seek or expect any favorable treatment," said Dodd, who is negotiating a bill to crack down on some types of subprime lending. "Just like millions of other Americans, we shopped around and received competitive rates."

Steve Calem, vice president of real estate lending at American Bank of Rockville, said such special deals are in line with his own experience.

"I work in a high-loan-amount environment, and in the past, when I've competed against big banks, and they've wanted to make a loan for a high-income individual, they have reduced their rate to below market by half of 1 percent to 1 percent to secure the loan," Calem said. "For special relationships, there's all sorts of stuff that goes on like that."

With more than 20 million loans in its 40-year history, Countrywide has done its share of business among members of Congress. In recent years, about 16 members have disclosed mortgages from the lender, including the third-ranking House Republican, Conference Committee Chairman Adam H. Putnam (Fla.), and the third-ranking House Democrat, Whip James E. Clyburn (S.C.).

Offices reached yesterday said the lawmakers obtained their mortgages through customary channels, with one even using Countrywide's toll-free number.

Clyburn spokeswoman Kristie Greco said the congressman did not receive a favorable rate when he refinanced a loan valued between $100,000 and $250,000 for his house in South Carolina. Clyburn also had a bad experience with a Countrywide loan officer, Greco said, which prompted him to pay off the debt and vow that he would "never borrow from them again."

Yet Countrywide aimed to please. One employee familiar with the FOA program, who spoke on the condition of anonymity because of the matter's sensitivity, said loan officers tried to satisfy customers by "lowering the processing fees or the pricing."

"If I had a client who gave me a lot of business, I would probably try to give that person a better rate than someone else who just walked off the street," the employee said. As for friends of Mozilo, "it's human nature that you want to help them if they are friends with the boss."

Mozilo once offered Cecala, a longtime mortgage industry reporter, help with his own mortgage refinancing. The rates were "good, but not great," Cecala said. He declined.

"Some people give bottles of wine. He says, 'Come and ask. I will give you a good rate on a mortgage,' " Cecala said.

On Capitol Hill, Countrywide also spread support the old-fashioned way. Since 1990, Mozilo and his family have contributed at least $110,000 to federal political committees, according to data compiled by the Center for Responsive Politics. Mozilo donated $1,000 to Conrad in 1999, and Countrywide's political action committee gave Conrad $6,000 in 2005 and 2006. Countrywide's PAC has given Dodd donations totaling $21,000 since 1997.

But as the subprime crisis spreads, such largess has become a liability. The conservative advocacy group Freedom's Watch yesterday trumpeted the "sweetheart deal" extended to Dodd and Conrad. Citizens for Responsibility and Ethics in Washington, a liberal-leaning group, asked the House and Senate ethics committees to investigate.

"Although there is no evidence that either Sen. Dodd or Sen. Conrad were aware they were receiving special treatment from Countrywide, their receipt of the unusually favorable loans creates exactly the sort of appearance of impropriety that the gift rule was designed to address," CREW wrote in a statement.

Staff writers Renae Merle, Joe Stephens and James V. Grimaldi contributed to this report.

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