The VIP Treatment: Countrywide CEO Offers Better Rates for Prominent Few

Senators Chris Dodd and Kent Conrad reportedly received favorable rates on loans


June 13, 2008 — -- Friends of Countrywide Financial CEO Angelo Mozilo and other high-profile individuals had their home loans handled by the company's VIP desk, where a team of loan officers would work out favorable terms in conjunction with Mozilo, according to two former Countrywide executives.

"Celebrities get their loans from somewhere," said one former executive who likened the favorable loans to employee discounts. "That desk handled loans for people who were referred by executives. The way that it would customarily work is he [Angelo] might call in, 'What can we do? What are we charging on this or that?' and then tell [his friend] 'I'll get you that at X. Don't worry. I'll get you the loan."

Some of the beneficiaries didn't even know that they were receiving special benefits; others may have been aware that they were receiving some kind of discount, according to the former executives. Internally, those whom Mozilo favored for special treatment were referred to as "Friends of Angelo." The executives say that he was in frequent contact with the company's VIP desk.

Those VIPs who received loans through the program that waived points, lender fees and company borrowing rules included Senators Chris Dodd and Kent Conrad, former HUD Secretary Alphonso Jackson, former HHS Secretary Donna Shalala and former UN ambassador Richard Holbrooke, according to Conde Nast Portfolio magazine.

For these VIPs, Countrywide would reduce the interest rate on their loans by waiving at least half a point and eliminating fees for underwriting, processing and document preparation, reports Portfolio.

Senator Dodd reportedly received two loans in 2003 through the program, borrowing $506,000 and $275,042 to refinance homes in Washington and East Haddam, Connecticut. Countrywide waived $2,000 on the first loan and $700 on the second, according to Portfolio.

Since 1997, Countrywide has contributed $21,000 to Dodd's campaigns. During his presidential campaign last year, Dodd introduced legislation to ban practices reportedly used by loan officers at Countrywide _ charging prepayment penalties and steering buyers to costly loans.

In a written statement to ABC News, Dodd's spokesman said, "The Dodds received a competitive rate on their loans. They did not seek or anticipate any special treatment and they were not aware of any."

Senator Conrad received a $10,700 discount on a $1.07 million loan to refinance his vacation home in Delaware at the request of Mozilo, according to Portfolio.

When Conrad refinanced an eight-unit apartment building in Bismarck, North Dakota, which violated the company's policy of not providing loans for larger buildings, Mozilo told a staffer in an email to "make an exception due to the fact that the borrower is a senator," according to Portfolio.

Conrad disputed the conclusion of the article, claiming in a written statement that he was unaware of any discount but deserved a competitive rate because his family had "spotless credit, put 20 percent down; we were mortgage free, having paid off our residence in Washington, DC; and we had more than 60 percent equity in our Bismarck apartment building, which is also my home."

He added, "I never asked for, expected or was aware of any special treatment. And I certainly did not know — until this article — that I was placed in any program that gave preferential rates or waived fees. To leave the impression that I did is a complete lie."

The brewing scandal surrounding VIP treatment hit the presidential campaign last week when James Johnson resigned from Senator Barack Obama's vice presidential search committee after reports that he received favorable mortgage terms from Countrywide Financial.

Johnson, the former head of Fannie Mae, the organization that guarantees mortgages for millions of American homeowners, received loans worth more than $5 million from Countrywide at below-market rates, according to the Wall Street Journal. Among the loans were a $5 million home equity line of credit against a house in Ketchum, Idaho, a 3.875% loan of $971,650 for a home in Washington, D.C., and a 5.25% loan of $1.3 million for a home in Palm Desert, Calif.

The loan figures were confirmed for by Johnson's lawyer, Brian Brooks, who emphasized that Johnson "never asked for a special deal. There was no conversation between Jim and Angelo Mozilo and we have no knowledge that he [Angelo] did step in."

In his resignation, Johnson added that recent news reports contained "blatantly false statement and misrepresentations" about him.

Brooks disputed the contention that the loans were below market, explaining that "these interest rates aren't that different from what you'd expect for a high-net-worth individual whose is borrowing less relative to the value of the house."

The revelation became a hot-button issue in the campaign, since Obama has frequently criticized subprime lenders, including Countrywide Financial CEO Angelo Mozilo as one of the executives of top mortgage lenders who Obama says "tricked" homeowners into loans they couldn't afford.

Jackson, the former secretary of Housing and Urban Development, a federal agency which worked closely with Countrywide through its regulation of real estate settlements and closing costs and by guaranteeing mortgages, insisted to Portfolio that he never received any discounts on his loans from Countrywide.

Shalala could not be reached for comment and Holbrooke did not return calls for comment.

The current head of Fannie Mae, Daniel H. Mudd, the son of veteran CBS newscaster Roger Mudd, also received two mortgage loans from Countrywide on his home in Washington, D.C. but did not receive favorable treatment, according to the former Countrywide executive and a spokesman for Fannie Mae.

"He never had any conversations with any executives at Countrywide about the loan and the terms and rates were in line with market range at the time," said the spokesman.

Mozilo's generosity to high-profile borrowers extended to their children, according to one former executive. "If someone's kid was going to get a loan and that person was someone well-established, Angelo would say, 'Don't worry, we'll get it done.' Sometimes the loan would come back and have a problem."

The informal process outraged some loan officers at the company, according to one former executive.

"He would make a credit decision without having an underwriter look at the mortgage. We were trying to create an environment where people abide by a set of rules and the head of the credit division doesn't go through the process?"

A spokesperson for Countrywide declined comment and declined to make Mozilo available to respond to the claims.

ABC News Live

ABC News Live

24/7 coverage of breaking news and live events