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Dodd, Conrad told deals were sweetened
2009-07-27
WASHINGTON - Despite their denials, influential Democratic Sens. Kent Conrad and Chris Dodd were told from the start they were getting VIP mortgage discounts from one of the nation's largest lenders, the official who handled their loans has told Congress in secret testimony. Muzi.com News 10092263-1 (muzi.com)Both senators have said that at the time the mortgages were being written they didn't know they were getting unique deals from Countrywide Financial Corp., the company that went on to lose billions of dollars on home loans to credit-strapped borrowers. Dodd still maintains he got no preferential treatment. Muzi.com News 10092263-2 (muzi.com) Dodd got two Countrywide mortgages in 2003, refinancing his home in Connecticut and another residence in Washington. Conrad's two Countrywide mortgages in 2004 were for a beach house in Delaware and an eight-unit apartment building in Bismarck in his home state of North Dakota. Muzi.com News 10092263-3 (muzi.com) Robert Feinberg, who worked in Countrywide's VIP section, told congressional investigators last month that the two senators were made aware that "who you know is basically how you're coming in here." Muzi.com News 10092263-4 (muzi.com) "You don't say 'no' to the VIP," Feinberg told Republican investigators for the House Oversight and Government Reform Committee, according to a transcript obtained by The Associated Press. Muzi.com News 10092263-5 (muzi.com) The next day, Feinberg testified before the Senate Ethics Committee, an indication the panel is actively investigating two of the chamber's more powerful members: Muzi.com News 10092263-6 (muzi.com) • Dodd heads the Banking Committee and is a major player in two big areas: solving the housing foreclosure and financial crises and putting together an overhaul of the U.S. health care system. A five-term senator, he is in a tough fight for re-election in 2010, partly because of the controversy over his mortgages. Muzi.com News 10092263-7 (muzi.com) • Conrad chairs the Budget Committee. He, too, shares an important role in the health care debate, as well as on legislation to curb global warming. Muzi.com News 10092263-8 (muzi.com) Both senators were VIP borrowers in the program known as "friends of Angelo." Angelo Mozilo was chief executive of Countrywide, which played a big part in the foreclosure crisis triggered by defaults on subprime loans. The Calabasas, Calif.-based company was bought last July by Bank of America Corp. for about $2.5 billion. Muzi.com News 10092263-9 (muzi.com) Mozilo has been charged with civil fraud and illegal insider trading by the Securities and Exchange Commission. He denies any wrongdoing. Muzi.com News 10092263-10 (muzi.com) Asked by a House Oversight investigator if Conrad, the North Dakota senator, "was aware that he was getting preferential treatment?" Feinberg answered: "Yes, he was aware." Muzi.com News 10092263-11 (muzi.com) Referring to Dodd, the investigator asked: Muzi.com News 10092263-12 (muzi.com) "And do you know if during the course of your communications" with the senator or his wife "that you ever had an opportunity to share with them if they were getting special VIP treatment?" Muzi.com News 10092263-13 (muzi.com) "Yes, yes," Feinberg replied. Muzi.com News 10092263-14 (muzi.com) Bryan DeAngelis, Dodd's spokesman, said Feinberg has repeatedly made allegations of special treatment that were not true. Muzi.com News 10092263-15 (muzi.com) "As the Dodds have said from the beginning, they did not seek or expect any special rates or terms on their loans and they never received any. They were never offered special or sweetheart deals and if anyone had made such an offer, they would have severed that relationship immediately." Muzi.com News 10092263-16 (muzi.com) DeAngelis also repeated Dodd's statements from last February that an independent report showed the terms received by the senator and his wife were widely available at the time. Muzi.com News 10092263-17 (muzi.com) Conrad's spokesman, Chris Gaddie, said Monday that the senator "never asked for, expected or was aware of loans on any preferential terms" and has "worked overtime to set the record straight." Muzi.com News 10092263-18 (muzi.com) "He went with Countrywide simply because they already had his financial information," Gaddie said. He added that a Countrywide official had told Conrad that "it is not unusual for them to make exceptions for good customers if they could sell the loan in the secondary market. We now know that they did sell the apartment building loan in the secondary market." Muzi.com News 10092263-19 (muzi.com) The ethics committee determines whether senators violated standards of conduct. The outcome of the investigation could hinge on whether the mortgage violated strict limits on gifts to lawmakers or ran afoul of other Senate rules. The committee typically just issues a report. It could recommend a censure vote by the Senate, but that is rare. Muzi.com News 10092263-20 (muzi.com) Feinberg could face criminal prosecution if shown to have made false statements. He was questioned closely by three of the ethics committee's six senators: Democratic Chairman Barbara Boxer of California; the panel's senior Republican, Johnny Isakson of Georgia, and Republican Jim Risch of Idaho, according to Elana Goldstein, one of Feinberg's attorneys who accompanied him to both closed-door committee appearances. Muzi.com News 10092263-21 (muzi.com) The ethics questioning was intense at times, and Boxer asked the bulk of the questions, Goldstein said. When Feinberg described a conversation he had with Dodd, Boxer demanded to know how he remembered it. Feinberg said he recalled Dodd saying he had to leave to make a speech. Muzi.com News 10092263-22 (muzi.com) Boxer asked whether Dodd and Conrad received VIP treatment because they were senators. Feinberg said that was not the case; they received breaks as other influential people in Countrywide's "friends of Angelo" VIP program. Muzi.com News 10092263-23 (muzi.com) Isakson, a one-time real estate executive, asked more detailed questions about the mortgage agreements' terms. Muzi.com News 10092263-24 (muzi.com) Countrywide VIPs, Feinberg told the committees, received discounts on rates, fees and points. Dodd received a break when Countrywide counted both his Connecticut and Washington homes as primary owner-occupied residences -- a fiction, according to Feinberg. Conrad received a type of commercial loan that he was told Countrywide didn't offer. Muzi.com News 10092263-25 (muzi.com) "The simple fact that Angelo Mozilo and other high-ranking executives at Countrywide were personally making sure Mr. Feinberg handled their loans right, is proof in itself that the senators knew they were getting sweetheart deals," said Feinberg's principal attorney, Anthony Salerno. Muzi.com News 10092263-26 (muzi.com) Two internal Countrywide documents in Dodd's case and one in Conrad's appear to contradict their statements about what they knew about their VIP loans. Muzi.com News 10092263-27 (muzi.com) At his Feb. 2 news conference, Dodd said he knew he was in a VIP program but insisted he was told by Countrywide, "It was nothing more than enhanced customer service ... being able to get a person on the phone instead of an automated operator." Muzi.com News 10092263-28 (muzi.com) He insisted he didn't receive special treatment. However, the assertion was at odds with two Countrywide documents entitled "Loan Policy Analysis" that Dodd allowed reporters to review the same day. Muzi.com News 10092263-29 (muzi.com) The documents had separate columns: one showing points "actl chrgd" Dodd -- zero; and a second column showing "policy" was to charge .250 points on one loan and .375 points on the other. Another heading on the documents said "reasons for override." A notation under that heading identified a Countrywide section that approved the policy change for Dodd. Muzi.com News 10092263-30 (muzi.com) Mortgage points, sometimes called loan origination fees, are upfront fees based on a percentage of the loan. Each point is equal to 1 percent of the loan. The higher the points the lower the interest rate. Muzi.com News 10092263-31 (muzi.com) Dodd said he obtained the Countrywide documents in 2008, to learn details of his mortgages. Muzi.com News 10092263-32 (muzi.com) In Conrad's case, an e-mail from Feinberg to Mozilo indicates Feinberg informed Conrad that Countrywide had a residential loan limit of a four-unit building. Conrad sought to finance an eight-unit apartment building in Bismarck that he had bought from his brothers. Muzi.com News 10092263-33 (muzi.com) "I did advise him I would check with you first since our maximum is 4 units," Feinberg said in an April 23, 2004, internal e-mail to Mozilo. Muzi.com News 10092263-34 (muzi.com) Mozilo responded the same day that Feinberg should speak to another Countrywide executive and "see if he can make an exception due to the fact that the borrower is a senator." Muzi.com News 10092263-35 (muzi.com) Feinberg said in his deposition with House Oversight investigators last month that exceptions for the type of loan Conrad received were not allowed for borrowers outside the VIP system. Muzi.com News 10092263-36 (muzi.com) "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,'" Feinberg said. Muzi.com News 10092263-37 (muzi.com) Feinberg also told House investigators that Countrywide counted both of Dodd's homes as primary residences. Muzi.com News 10092263-38 (muzi.com) "He was allowed to do both of those as owner-occupied, which is not allowed. You can only have one owner-occupied property. You can't live in two properties at the same time," he said. Muzi.com News 10092263-39 (muzi.com)
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