Reporting from Washington and Orange County —
A congressional investigation has found that Countrywide Financial Corp. made 173 preferential mortgage loans to employees of housing finance giants Fannie Mae and Freddie Mac, which purchased many of the company's loans.
The mortgages were made as part of Countrywide's VIP program, known informally as "Friends of Angelo" for former Countrywide Chief Executive Angelo R. Mozilo. The program offered discounted rates and other perks.
Previous investigations found that VIP loans were given to some influential Washington players, including Senate Banking Committee Chairman Christopher J. Dodd (D-Conn.) and former Fannie Mae Chief Executive Franklin Raines.
Employees of Fannie Mae received 153 of the preferential mortgages, and Freddie Mac employees received 20, said California Rep. Darrell Issa (R-Vista), the ranking Republican on the House Oversight and Government Reform Committee, which has been investigating the program.
Many of the loans came in 1998 as Countrywide was negotiating a discounted rate for the sale of its mortgages to Fannie Mae.
Issa revealed the large number of loans to Fannie Mae and Freddie Mac employees in a letter Tuesday to the general counsel of the Federal Housing Finance Agency. The agency, which said it would respond promptly to Issa's request for an investigation, regulates the government-sponsored enterprises, which were seized by federal officials in 2008.
"As our nation marched down the path leading to a crippling financial crisis, Fannie Mae should have been trying to cool off risky subprime lending and protect the economy from a volatile housing bubble," Issa said. "The sweetheart deals to officials at Fannie Mae and Freddie Mac, however, raise serious doubt that they could have said no to the risky business practices of Countrywide."
Former Countrywide employees have said the VIP loans carried interest rates that a typical borrower would have had to negotiate hard to receive, yet were acceptable to the Calabasas lender. Bank of America Corp. bought Countrywide in 2008.