Senators Deny Knowing Of Home Loan Favoritism
Senate Ethics Panel Is Investigating

By Paul Kane
Washington Post Staff Writer
Wednesday, June 18, 2008

Senate banking committee Chairman Christopher J. Dodd said yesterday that he knew he was part of a "VIP" mortgage program offered by Countrywide Financial, but he said he was not aware that the privilege included waiving fees that regular customers must pay to obtain lower interest rates.

Dodd (D-Conn.) -- who reportedly received the special treatment as part of the company's "Friends of Angelo" program, named for chief executive Angelo Mozilo -- said loan officers told him and his wife in 2003 that they would be part of an exclusive program. But the couple assumed the plan gave them unspecified courtesies and did not ask whether it included a waiver of the fees, known as points, or a reduced interest rate on their loans, the senator said.

"I don't know that we did anything wrong. I negotiated a mortgage at a prevailing rate, a competitive rate. . . . I did what I was supposed to do," Dodd told reporters at a news conference called to discuss the matter and legislation to address the nation's housing crisis.

The Senate ethics committee has begun a preliminary investigation of the special treatment afforded Dodd and Sen. Kent Conrad (D-N.D.), who received a one-point reduction on his Countrywide mortgage.

The committee Dodd chairs oversees the mortgage industry, and he is the lead Senate negotiator on a package of legislation designed to deal with the fallout from the subprime mortgage crisis. At the time the loan was offered, Dodd was a senior member of the banking committee.

Countrywide, the nation's largest mortgage lender, is being purchased by Bank of America. It held about 20 percent of all U.S. mortgages two years ago and was the nation's largest holder of subprime mortgages before the housing crisis rocked the company's finances last year, sending its stock tumbling.

Conrad is chairman of the Budget Committee and a senior member of the Finance Committee, which has a role in negotiating the housing legislation.

According to Condé Nast Portfolio magazine, Dodd and Conrad were not the only officials to receive mortgage deals under Countrywide's program. Others included former housing secretary Alphonso Jackson, former U.N. ambassador Richard C. Holbrooke and former Health and Human Services secretary Donna E. Shalala, the magazine reported.

Dodd borrowed $506,000 at 4.25 percent to refinance a Capitol Hill townhouse, originally purchased in 1999, and $275,042 at 4.5 percent to refinance a home in East Haddam, Conn.

Rather than requiring him to pay the full amount to obtain the reduced mortgage rates, as other customers must, Countrywide waived three-eighths of a point, or about $2,000, on the first loan and a quarter-point, or $700, on the second.

Conrad spoke to Mozilo about his mortgage in 2002, but the deals under scrutiny were not finalized until 2004. Mozilo ordered one point waived on a loan for a more than $1 million vacation home in Bethany Beach, Del., providing a $10,700 benefit to Conrad.

Conrad also received financing in 2004 for an eight-unit apartment building in North Dakota from Countrywide, in apparent contradiction of the company's rules prohibiting mortgages for any dwelling with more than four units, according to Conrad's staff. Mozilo ordered subordinates to approve the apartment-building loan, according to an internal e-mail obtained by Portfolio, because "the borrower is a senator."

Like Dodd, Conrad denied knowing that he was part of a program that had saved him money. "I had absolutely no clue they had done that," he said yesterday.

Yesterday, Conrad paid off the final $32,000 on the multi-unit mortgage and contributed $10,700 to Habitat for Humanity to compensate for the benefits from the beach house loan.

Dodd said he has no plans to make charitable donations or refinance his mortgage with Countrywide. "I don't feel at this point I have any obligation," he said, adding that he spoke only to "loan officers" and that it would have been inappropriate to talk to Mozilo directly about his mortgage.

"I did not seek, nor was I aware of, nor did I at the time try to solicit" a special deal, he said.

Dodd said he and his wife, Jackie, sought several refinancing offers from such companies as Washington Mutual and Lending Tree. Countrywide's rates were competitive with other offers, he said.

They knew "there was a VIP section that we were in" but thought it was given to them because they had been with Countrywide since 1999 and had two mortgages, Dodd said.

"We literally just assumed it was a courtesy. . . . There was no red flag to me that we were getting anything special," Dodd said.

Citizens for Responsibility and Ethics in Washington (CREW), a liberal watchdog group, filed a complaint Friday with the Senate ethics committee requesting an investigation of the Countrywide loans. It cited Senate rules that allow for "loans from banks and other financial institutions on terms generally available to the public."

Sen. Barbara Boxer (D-Calif.), chairman of the ethics committee, confirmed yesterday that the panel had begun a preliminary inquiry into the loans based on the CREW request. "A complaint has been filed and we are, as we always do, looking at that," she said.

Conrad said he understands that despite the compensation he made, the ethics committee still may rule that the terms of his loan were inappropriate. "They're going through a process. The focus is: Was there a gift? So we have to wait," he said of the inquiry.