The company that used to be the largest mortgage lender in the nation but has since fallen into disgrace and been absorbed by Bank of America may have granted unfairly beneficial loans to lawmakers and others in an attempt to gain influence.
A new report from the U.S. House of Representatives shows that Countrywide Financial used to make a habit of granting mortgages with premium terms to members of Congress, staffers, and family members as part of a “VIP program,” according to a report from CNNMoney. The findings were uncovered as part of a three-year investigation led by Darrell Issa, who chairs the House Oversight and Government Reform Committee.
Countrywide specialized in granting home loans to subprime borrowers, many of whom defaulted on their mortgages which led to extraordinarily high foreclosure rates in 2007, the report said. Bank of America, which now owns Countrywide’s assets, says it discontinued the VIP program when it purchased the company in 2008.
The Congressional study found that those who received favorable home loan terms through the program were typically given discounts of between 0.5 and 1 percentage points on originations, lower rates, and found fees waived — potentially saving them hundreds of dollars, the report said. Further, many were allowed to take advantage when rates dropped between a lending agreement and the date of closing, for free. Typically, this practice, known as a “float,” is allowed, but comes with a sizable fee.
Further, those members of the VIP program typically found the underwriting standards on their own loans relaxed, the report said. In some cases, Countrywide employees filled in parts of applications left blank when program members did not reveal their employment status or income.
Among those accused of receiving the beneficial loan terms were U.S. Senators Chris Dodd, former head of the Senate Banking Committee, and current Senate Budget Committee chairman Kent Conrad, the report said. In addition, Reps. Edolphus Towns, Buck McKeon, Tom Campbell and Elton Gallegly also saw the terms of their Countrywide-issued home loans listed in the report.
To this day, many consumers have found it extremely difficult to qualify for new home loans thanks to extremely strict lending qualifications brought on by the economic downturn, and often, those who do qualify are required to make sizable down payments they would not have faced before the market collapse.
Image: JMR_Photography, via Flickr