Tuesday, July 20, 2010

'VIP' Loans Extended to Fannie Mae Executives

‘VIP’ loans extended to Fannie Mae executives

By Suzanne Kapner in New York
July 21 2010 00:59

Countrywide Financial made 153 “VIP” loans to Fannie Mae executives, in an effort to win goodwill from the giant mortgage finance company, according to a letter released on Tuesday by a US congressman.

An additional 20 VIP loans were made to Freddie Mac employees, the other large government-sponsored buyer of home loans, according to the details released by Darrell Issa, a California Republican.

Although it was known that some government officials received preferential mortgage loans from Countrywide, the findings show the involvement of Fannie and Freddie staff was greater than had been thought.

“Countrywide thought these sweetheart deals would buy them goodwill,” said Frederick Hill, a spokesman for Mr Issa, who sent his letter to the Federal Housing Finance Agency, which regulates Fannie and Freddie.

The findings, obtained from subpoenaed records studied by Mr Issa, are the latest in a two-year investigation into Countrywide and come as the housing finance reform debate heats up. The US Treasury has asked for comments about how housing finance should be restructured.

Barney Frank, a Massachusetts Democrat, has said that he plans to start work on new legislation when Congress returns from its August recess. The White House is expected to submit plans for fixing the system by early next year.

“The administration has made it clear that this is the next big issue,” said David Min, a financial markets expert at the Center for American Progress, a think-tank.

There does not yet appear to be consensus on how to revamp Fannie and Freddie, although criticism of their current public-private structure has been widespread.

Although they are private entities, their debt carried the implicit backing of the Federal government, potentially leading them to take unnecessary risks. Fannie and Freddie have received $145bn in taxpayer aid, which is likely to rise.

Fannie Mae decline to comment on Mr Issa’s letter. A Freddie Mac spokesman said its code of conduct that prevented employees from soliciting favourable loan treatment. And the FHFA said it had received Mr Issa’s “inquiry and will respond to him promptly”.

Last week, Mr Issa revealed that 30 “VIP” loans had been made to US senators or Senate employees.

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