More than 40 employees at mortgage finance giants Fannie Mae and Freddie Mac received special perks on mortgage loans from Countrywide as part of its former CEO's special VIP program, a top Republican U.S. lawmaker said on Tuesday.
The program, known as Friends of Angelo for former CEO Angelo Mozilo, included more Fannie Mae and Freddie Mac employees than previously disclosed, said California Representative Darrell Issa, the top Republican on the House Oversight and Government Reform Committee and a vocal critic of the two enterprises.
Issa wrote to Fannie Mae and Freddie Mac's regulator, the Federal Housing Finance Agency, urging an investigation into the relationship between Countrywide, Fannie and Freddie as well as whether employees of the two firms seized by the government in 2008 may have violated their employee code of conduct.
I am also interested in whether you believe this matter should be referred to the U.S. Department of Justice, Issa wrote to FHFA General Counsel Alfred Pollard.
Issa said 42 employees from Fannie Mae and Freddie Mac received 153 loans from Countrywide from the late 1990s to the early 2000s.
It was already disclosed that former Fannie Mae CEOs Franklin Raines, Jim Johnson and Daniel Mudd received VIP loans. Former Fannie Mae Vice Chair Jamie Gorelick also received a VIP loan.
No new names were disclosed in the latest letter.
In one 2001 e-mail regarding Mudd's loan, a Countrywide employee cautioned another employee to understand the sensitivity of this deal.
We are already taking a loss and it would be horrible to add a service complaint on top and lose any benefit we generate, the employee wrote in the e-mail, provided to Reuters on Tuesday.
Issa said that e-mail showed Countrywide's true intent for giving special deals to top executives at Fannie Mae. At the time, Mudd was COO.
Under the guise of providing sweetheart loans to Fannie and Freddie executives, Countrywide was able to game the system at the expense of the American people and our nation's fiscal solvency, Issa said.
Countrywide was very cognizant, calculating and ultimately effective at furthering their bottom line by co-opting the very people who should have been acting as stewards of the mortgage market and instead swapped their responsibilities for VIP loans, Issa added.
In 1999, Countrywide signed a deal to sell billions of dollars of mortgages to Fannie Mae at a discounted rate, Issa wrote in the letter to Pollard.
The government seized Fannie Mae and Freddie Mac in late 2008 as losses from risky loans mounted. The two have thus far received more than $145 billion in taxpayer funds and that number is expected to continue to grow.
A Fannie Mae spokesman did immediately respond to a request for comment.
Freddie Mac spokesman Douglas Duvall said he could not comment on specific employees but we have an employee code of conduct that says employees can't solicit or accept discount prices or more favorable loan terms on the basis of their status as a Freddie Mac employee.
Countrywide Financial Corp was acquired by Bank of America in 2008.