Senators Dodd, Conrad tied to special mortgage deals

June 13, 2008 2:25:02 PM PDT
Senate Banking Committee Chairman Christopher Dodd reportedly received two mortgages under a special Countrywide Financial Corp. program that gave preferential interest rates to "friends" of the company's chairman. At least one other lawmaker, Sen. Kent Conrad, D-N.D., also benefited from the VIP treatment after placing a personal call to Countrywide CEO Angelo Mozilo seeking a mortgage. Both senators say they weren't aware they were getting special deals. Still, their involvement in a special program that awarded discounts and waived fees for "friends" of Mozilo - first reported by Conde Nast Portfolio magazine - raised questions about whether lawmakers weighing a homeowner rescue themselves benefited from the actions of a leading offender in the mortgage meltdown. It could be especially damaging for Dodd, D-Conn., one of four Democrats who pursued his party's 2008 presidential nomination, given his high-profile role in crafting a broad housing rescue. It comes as Dodd is engaged in intense behind-the-scenes negotiations with lawmakers and the Bush administration to complete that measure. "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. Lawmakers' participation in the VIP program is coming to light just days after similar revelations prompted Barack Obama, the presumptive Democratic nominee, to ax one of his vice presidential vetters, Jim Johnson, who also apparently benefited. Conrad, the Budget Committee chairman, said it was Johnson who referred him to Mozilo in 2002 when the North Dakotan was seeking a loan to buy a vacation home in Bethany Beach, Del. "I called (Mozilo). I said, 'I'm buying this property. Would you be interested in the mortgage?', and he said, 'Yeah. Call these people and we'll take a look,"' Conrad said. "I deal with the heads of companies every day, and I didn't find it at all unusual. I did not think for one moment - and no one ever suggested to me - that I was getting preferential treatment," Conrad said. Portfolio reported that Countrywide made two loans at special rates to Dodd in 2003. One was a $506,000 loan to refinance a Washington townhouse. The second was $275,042 for refinancing a loan on a home in East Haddam, Conn. According to internal documents cited by Portfolio, Countrywide waived three-eighths of a point on the townhouse loan, saving Dodd about $2,000 a year in interest payments. They knocked off one-fourth of a point on the second, saving Dodd close to $700 a year. Both loans were for 30 years, with the first five years at a fixed rate. "When my wife and I refinanced our loans in 2003, we did not seek or expect any favorable treatment. Just like millions of other Americans, we shopped around and received competitive rates," Dodd said. Conrad obtained a $1.16 million loan from Countrywide in 2002 to buy his vacation home, then refinanced twice through the company. Portfolio reported that an internal e-mail from Mozilo instructed an employee to give Conrad a 1-percent discount off his interest rate on his 2004 refinance of $1.07 million, a savings of about $10,000 a year in interest payments.

Conrad said the terms he received each time he did business with Countrywide were no better than market rates, particularly given that he had good credit and a spotless payment history.

But he said his former loan officer has since acknowledged to Conrad that Countrywide dropped the rate a full percentage point.

"If they did me a favor, they did it without my knowledge and without my requesting it," Conrad said. "It's an appearance issue, but in terms of substance, I have not done one single thing wrong here."

Countrywide also made an exception in lending Conrad $96,000 in 2004 to buy an 8-unit apartment building from his brothers. The company had a policy of only providing loans for buildings of four units or fewer.

"They said they frequently made exceptions, especially for good customers, and I was a very good customer," Conrad said.

An internal e-mail from Mozilo, however, said the exception was "due to the fact that the borrower is a senator," according to the Portfolio report.

The magazine said other participants in the company's VIP program included former Secretary of Housing and Urban Development Alphonso Jackson, former Secretary of Health and Human Services Donna Shalala, and former U.N. ambassador and assistant Secretary of State Richard Holbrooke.

Countrywide did not respond to requests for comment.

Mozilo received a compensation package valued at more than $22.1 million, and cashed $121.5 million in stock options, in 2007, a year Countrywide posted a loss of over $700 million dollars and saw its stock plummet 80 percent from its peak. The company agreed in January to be acquired by Bank of America Corp. for $4.1 billion in stock.

Countrywide has come under scathing fire from congressional Democrats for its lending practices, including providing mortgages with low initial "teaser" rates that quickly balloon higher than borrowers can afford. Dodd and other Banking Committee Democrats wrote to Federal Reserve Chairman Ben Bernanke in December 2007 singling out Countrywide and calling the loans "abusive to individual borrowers."

A non-government ethics watchdog group, Citizens for Responsibility and Ethics in Washington, wrote to the House and Senate ethics committees requesting Friday that they investigate Dodd and Conrad, and determine whether any other lawmakers received preferential mortgages through the Countrywide program.

"It's clearly a violation" of Senate ethics rules, which bar lawmakers from getting loans more favorable than those available to the general public, said Melanie Sloan, CREW's executive director. "But it's very hard to know what to do about a violation that the members were unaware of."


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