Senators Dodd, Conrad tied to special mortgage deals
WASHINGTON - 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."