(Updated below with information defending Sen. Dodd. --Jed)
Last year, we learned that both Kent Conrad and Chris Dodd had received preferential loan treatment from Countrywide through a VIP program run by former CEO Angelo Mozilo called "Friends of Angelo."
Both Conrad and Dodd denied knowledge of the program (even though Kent Conrad admitting to directly calling Mozilo, who is now facing insider trading and security fraud charges, for the loan), but according to newly released sworn testimony from a former Countrywide loan officer, both Conrad and Dodd lied.
WASHINGTON – Two influential Senate committee chairmen were told they were getting special VIP deals when they applied for mortgages, an official who handled their loans told Congress in closed-door testimony. Democratic Sens. Christopher Dodd and Kent Conrad had denied knowing they were getting discounts when they negotiated their loan terms.
Robert Feinberg, who worked in the VIP section of Countrywide Financial Corp., testified about the loan terms before the Senate Ethics Committee, and provided the same information in an interview with Republican investigators of the House Oversight and Government Reform Committee. He could be prosecuted for making false statements.
Both Conrad and Dodd were approved for loans that did not conform to Countrywide's lending standards. Conrad was able to secure loan for an apartment building with eight units even though Countrywide's limit for such loans was four units, and Dodd was able to secure loans on two properties as if both were his primary residence. Each senator received loan discounts potentially worth tens of thousands of dollars.
Politico obtained a portion of the testimony:
Q What I was asking was whether this conversation with the Senator, where you said that you had won, was the only conversation they ever had? Or was it only conversation was previous property?
A Yeah, because previous to this I had not worked with him and he had gotten loans before, so I had not worked with him. And, actually, Amerigo worked with him quite a bit. Amerigo had left in mid — I could be wrong — I don't have an exact date, but say mid to late '03. And you can see this is '04, so I inherited anybody that was talking to him. And he talked quite a bit to Senator Conrad. I wasn't real chatty with people. I was like moving on to the next one, because it's like I said: You have to multi-task like crazy and you're very busy. So I was more just trying to get through each call and get it finished, and get the loan on the books.
Q And in your communications with Senator Conrad, whether the one phone call you identified or the e-mails you exchanged with his office, do you know whether he was aware that he was getting preferential treatment?
A Yes, he was aware.
Q And why did you say that?
A By preferential treatment, I mean specifically the suite of advantages, whether he's knocking the points off, knocking the junk fees. I have to preface it by that we were not allowed to tell anybody what the points were being waived, but we can tell everything else; and, any person, FOA, VIP, whatever they were that was coming through there, it was always instilled in them to let them know their sense of importance of where they were. And that you are, were a friend of Angelo's. You were referred by Angelo. You were approved by Angelo. There were many different ways of saying it, so the discount was there and we would let them know. Now, if anyone really pushed on the rate what the discount was, we would have to give it off to say Doug, or a manager, basically, which would be Doug, and say, look. This person really wants to know what they're getting. Also, as I stated earlier, when the loan comes out of the VIP processing unit their business cards are stapled in loan packages. It says "VIP Supervisor," "VIP Underwriter."
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Q The one telephone call that you remember having with Senator Conrad was in relation to this eight-unit apartment building in Bismarck, North Dakota?
A Yeah, because I distinctly remember him telling me that not only was it an issue for the most part that it was a commercial loan, but also that he has two brothers on it. So now it because a rental property. There's two family members on it. So at that time, that was really confusing. You know, in guidelines in terms of trying to structure something so I didn't know what to do, because I never had that. I didn't have somebody say, well, I want this, or I want an apartment building complex, a warehouse or something; and, again, you never said no. If there was a regular customer calling, and of course you say no, we're a residential lender. We cannot provide you with that service. You're going to have to speak with, you know, outside Countrywide, go find a bank or someone that could do it. In this case it wasn't going to be a no. It was going to be let me find out, and that's what you see these e-mails. I'm finding out.
Q So it was because he was afforded FOA, VIP treatment?
A Absolutely.
Q Because he was a senator?
A I would say because he was an FOA.
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Q And do you know if during the course of your communications with Senator Dodd were his wife that you ever had an opportunity to share with them if they were getting special VIP treatment?
A Yes, yes.
Q You did communicate that to him?
A Yes, yes. I mean, they'd already been there to begin with, so they knew. You know, once you're basically in the VIP department you're in. You know, you're done. You don't even have to really talk to Angelo if you don't want to, because as I keep stating, you go back and you see somebody at 850, if you're not sure who they are then you'll talk to somebody. I may talk to Maritza. I may say do you know who this person? Oh, yeah, we did their loan such and such a time, this many years ago, or whatever. Yeah, that's a friend of Angelo's. Okay, we'll go with it. You might ask Doug or you might ask Stephen or somebody.
Both Dodd and Conrad are sticking to their stories that they had no idea they were getting preferential treatment, but when you have Kent Conrad directly calling up the CEO of a mortgage firm about getting a loan, it's pretty hard to take their denials seriously.
Update (1:10PM): David Fiderer defends Sen. Dodd's claim that he did not receive preferential treatment despite being enrolled in the program.
Feinberg lied by claiming that Dodd received free "float-downs" when he refinanced the mortgage loans on his homes in Connecticut and Washington. The free float-downs purportedly reduced the interest rate on one $275,000 loan from 4.875 percent to 4.5 percent, and reduced the rate on another $506,000 loan from 4.875 percent to 4.25 percent. (For an analysis of why the calculation of a $75,000 savings was fraudulent, go here.)
But there never was any float-down. The truth is far more banal and obvious. When Dodd applied to refinance his mortgages in April 2003, the market rate was 4.875 percent. At the time of his application, Dodd did not lock in his rate. Instead, he assumed the risk that rates might rise above 4.875 percent or that they might decline further. When Dodd closed on his mortgages several months later, market rates had fallen, and he got the lower spot rates, which were same rates extended to any comparable borrower at the time.
We now know the truth based on documents that Feinberg concealed from Portfolio but handed over to Rep. Darrel Issa, who is unilaterally attempting an end-run around the Senate Ethics Committee investigation into the matter. The documents for Dodd's mortgage application show "Not Applicable" on the line for a rate-lock, a product which would have allowed Dodd to lock in his rates at the time of his application in April 2003, before his closings in June and July 2003.
Fiderer is correct about mortgage rates dropping. According to Freddie Mac's historical data the national 30-year fixed rate mortgage averages dropped by six-tenths of a point between April and June of 2003.
Update 2 (1:56PM): Here's a document from firm hired by Dodd to audit his records and assess whether or not he got a preferential deal. According to the firm, the loan he got was widely available.
