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CAMPAIGN '08: RACE FOR THE WHITE HOUSE

Obama advisor's loans are criticized

Republicans highlight James A. Johnson's Countrywide ties.

June 10, 2008|Maeve Reston and E. Scott Reckard | Times Staff Writers

John McCain criticized his Democratic rival Monday for seeking campaign advice from a Washington power-broker who, Republican officials say, may have improperly received preferential treatment from a controversial mortgage lender.

The McCain campaign and Republican officials seized on a report in Saturday’s Wall Street Journal about James A. Johnson, who was tapped by Barack Obama to vet potential vice presidential candidates.

The newspaper reported that Johnson received discounted rates on two mortgage loans from Countrywide Financial Corp. after he stepped down a decade ago as the head of Fannie Mae.

A federally chartered institution, Fannie Mae buys mortgages from Countrywide and other lenders.

According to the Journal, lower-than-average mortgage rates were offered to Johnson and a special group of borrowers with close connections to Countrywide Chief Executive Angelo Mozilo.

Republican officials went further Monday, firing off e-mails to reporters suggesting wrongdoing by Johnson and calling his loan terms "highly questionable."

Republican National Committee spokesman Alex Conant charged that the issue "raises serious questions about Obama's judgment when we learn members of his campaign leadership are receiving favors that the average American would never get."

McCain, in an interview with Fox News, said the situation suggested "a bit of a contradiction" with Obama's promises on the kind of campaign operation he would run.

Johnson was not available for comment. But his lawyer Brian Brooks characterized the loans as typical for an "extraordinarily low-risk" customer like Johnson and that they had "nothing to do with some special personal relationship."

Brooks said that Johnson received one Countrywide loan during the seven years he headed Fannie Mae, and that it occurred shortly before he left in 1998.

He said the rate for the loan was 6.375%, about average at the time.

"He didn't get another Countrywide loan for three years -- long after he'd left Fannie Mae and I just don't see what that relationship, at that point, has to do with the tea in China," Brooks said.

Brooks said the interest rate levels and loan terms were not unusual for someone with Johnson's "credit history, his income, his net worth or the property values at issue."

At least one of the loans Johnson sought, Brooks added, was for 15% to 20% of the property value -- a factor that would probably lower the mortgage rates.

Overall, according to the Journal, Johnson received $7 million in loans from Countrywide, the nation's No. 1 mortgage lender. The Calabasas-based company didn't respond immediately to a request for comment on the loans.

Countrywide has for many years sold most of its smaller prime loans -- lower-risk mortgages made to more-qualified borrowers -- to Fannie Mae, and Countrywide was the institution's biggest source of loans.

Early this decade, Countrywide pushed aggressively into some of the riskiest forms of mortgage lending, only to be swamped by a tide of defaults last year.

It agreed in January to sell itself to Bank of America Corp. for $4 billion in stock, a fraction of its former worth.

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maeve.reston@latimes.com

scott.reckard@latimes.com

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