Do as I say…not as I do? Countrywide’s VIP Program and other Subjectivity Issues
Filed under: Lending Ethics, Mortgage Industry Trends — admin @ 11:45 am
A big gripe with consumer groups and regulators of our industry are the subjectivity and arbitrary nature of fee structures, which leaves the system open to discrimination and abuse. On June 12th, Portfolio.com outed Senators Dodd and Conrad for receiving “FOA” loans from Countrywide Financial. Following a vehement denial from Conrad in the Washington Post, one can’t help but feel like you just towel dried with a side of bacon.You may ask… FOA? Fallacious Option Arm? Oh no… nothing so pedestrian… FOA is the internal CWF designation for “Friends of Angelo.” According to Portfolio.com :
“the V.I.P.’s received better deals than those available to ordinary borrowers. Home-loan customers can reduce their interest rates by paying “points”—one point equals 1 percent of the loan’s value. For V.I.P.’s, Countrywide often waived at least half a point and eliminated fees amounting to hundreds of dollars for underwriting, processing and document preparation. If interest rates fell while a V.I.P. loan was pending, Countrywide provided a free “float-down” to the lower rate, eschewing its usual charge of half a point. Some V.I.P.’s who bought or refinanced investment properties were often given the lower interest rate associated with primary residences.”
Senators Christopher Dodd, Democrat from Connecticut and chairman of the Banking Committee, and Kent Conrad, Democrat from North Dakota, chairman of the Budget Committee and a member of the Finance Committee, refinanced properties through Countrywide’s “V.I.P.” program in 2003 and 2004, according to company documents and emails and a former employee familiar with the loans. Other participants in the V.I.P. 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. Jackson was deputy H.U.D. secretary in the Bush administration when he received the loans in 2003. Shalala, who received two loans in 2002, had by then left the Clinton administration for her current position as president of the University of Miami. She is scheduled to receive a Presidential Medal of Freedom on June 19.
Why this is a big deal? No one is surprised by the fact that those in the halls of power get favors…but frankly, the condescension and assumption of naivete in the response is chilling. This isn’t your dumb aunt Shirley who sent her life savings to the guy in Nigeria because he said that she would net out $85 million. These are the chairpersons of the UNITED STATES Budget Committee and the Banking Committee.
Conrad and Dodd are both playing this really cool, with wide blinking eyes and a hand to chest “who me?.” In the Wall Street Journal, Conrad editorialized as an “everyman” with an “aw shucks Goober” response… as though he sat down like the rest of us armed with a handful of mortgage solicitations and started “shopping rates” and just collided with Angelo Mozilo. You know, because Angelo still originates there at the office…he comes in at around 7 to get the multi-million dollar decisions off his desk, then settles down for an afternoon of cold calling a lead list.
Frankly, is anyone really surprised? Not really. I think insulted is more appropriate. Dodd is specifically crafting legislation that would drastically reform our industry… and when caught taking unfair advantage of the “subjectivity” in assessing fees? Well nothing. The American public is supposed to swallow the double talk and buy the notion that the most successful and savvy of politicians are completely unaware of captains of industry. Captains of industry flush with cash for contributions. No mea culpa or even sheepish toe kicking…sucker.
Stumble it!