Real Estate Blog

Mortgage financier has Freddie Mac has reported an $821 million second-quarter loss.

Originally posted here:
Money Minute: Freddie Mac, Countrywide, Retail

Illinois Attorney General Lisa Madigan plans to file suit against Countrywide and their orange-tinted CEO Angelo Mozilo tomorrow for risky and deceptive mortgage lending practices in the state.  Ms. Madigan claims that the state has ample evidence to charge Countrywide for lending practices that have put borrowers in loans that can’t be repaid, and using sales and marketing tactics that encouraged borrowers and rewarded employees to take and make risky loans.

Illinois, like other parts of the country is dealing with a massive uptick in home foreclosures.

From the Wall Street Journal:

In a draft of the complaint, Illinois alleges that the company engaged in “unfair and deceptive practices” in the sale of mortgage loans. The 78-page document says the company loosened its underwriting standards, structured loans with “risky features” and engaged in “marketing and sales techniques” that incentivized employees and mortgage brokers to push loans whether or not homeowners had the ability to repay them.

…

In an interview, Illinois Attorney General Lisa Madigan said Countrywide “broke the law and we plan to hold them accountable for that.” She added that Countrywide’s actions have led to widespread foreclosures in her state and have wrecked havoc around the world. “The impact on individual homeowners and communities and the country and the global economy is unbelievable.”

Ms. Madigan says she is asking that all Countrywide loans originated using “unfair and deceptive” practices be rescinded or modified in some way, even if Countrywide has to repurchase the loans. She is also asking that her office be given 90 days to review any loans that are currently in foreclosure or that are moving toward foreclosure. As part of its investigation, the Illinois attorney general’s office interviewed about 30 former Countrywide employees and mortgage brokers and reviewed more than 100,000 pages of documents, Ms. Madigan said.

Mr. Mozilo was included as a defendant because he “participates in, manages, controls, and has knowledge of the day-to-day activities” of Countrywide, the lawsuit says.

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Illinois to sue Countrywide, Mozilo

Tongues are wagging overtime on Capitol Hill over last week’s bombshell revelations that top congressional leaders received preferential mortgage rates and fees from Countrywide Financial — the ailing giant home loan company that will soon be acquired by Bank of America.

View original here:
Washington Report: Congressional VIP Loan Treatment

I wasn’t surprised to learn that US Senators get mortgages - that makes them - normal.
I wasn’t surprised to learn that US Senators get special deals - that makes them - normal.
I was surprised that key individuals who have influence over the mortgage clean-up didn’t recuse themselves from mortgage related perks or disclose them in advance.

I would hope that these incidents reflect nothing more than bad judgement by the officials involved. Here’s a great recap by Portfolio.com.

According to the WSJ, US Senator Dodd (CT) got special rates on two mortgages:

Sen. Christopher Dodd, a top figure in Democrats’ response to the housing crisis, defended through a spokesman two mortgages he reportedly received under a special Countrywide Financial Corp. program that awarded preferential interest rates to people referred to as “friends” of the company’s chairman and chief executive, Angelo Mozilo.

And US Senator Conrad also got a favorable rate from Countrywide:

“It appears Countrywide waived one point on my mortgage,” Conrad, a North Dakota Democrat, said in a statement today in Washington. “Although I did not ask for or know that I was receiving a discount, and even though I was offered a competitive loan from another lender, I do not want to have received preferential treatment.”

Conrad said he also received a loan from Countrywide on an eight-unit apartment building in Bismarck, North Dakota, even though the lender typically serves properties that have four units or less. He said he had decided to refinance that loan with another institution.

James Johnson, former head of Fannie Mae, just resigned from the Obama campaign for getting favorable financing from Countrywide.

Property records show Mr. Johnson has received more than $7 million in loans from Countrywide since 1998, the first coming in the waning days of his Fannie Mae tenure. He borrowed $392,950 on a row house in Washington’s Dupont Circle neighborhood, with the rate set for the first five years at 6.375%.

At the time, initial rates for such loans ranged from about 6.2% to 6.5%, according to data compiled for The Wall Street Journal by HSH Associates Inc., which surveys lenders.

And that created an awkward situation for Senator Obama:

Obama has made reforming how the housing market is regulated a centerpiece of his economic platform; as Fannie Mae’s CEO, Johnson worked closely with Mozilo facilitating what became an out-of-control mortgage boom. The massive accounting irregularities discovered at Fannie Mae after Johnson was no longer CEO (but still a consultant) don’t help either.

In other words, everyon seems to be completely and absolutely unaware of favoritism, but feel it is possible that favoritism exists.

Here is a visual recap of current and former government officials associated with Countrywide’s efforts.

• Christopher Dodd - US Senator
• Kent Conrad - US Senator
• Richard Holbrooke - former UN Ambassador
• Donna Shalala - former Secretary of HHS
• Alphonso Jackson - HUD Secretary
• James Johnson - former CEO of Fannie Mae

We are going through a mortgage/credit problem that began, was fueled and based on favoritism. The mortgage process during the housing boom was characterized by the lack of neutrality which is why investors ended up owning portfolios of inflated assets.

I am certainly exaggerating the impact here but the credit problems are unprecedented. Should it be a surprise to us that, even with the most neutral or unbiased intentions, a public official would be concerned how this would appear to the public if known? Isn’t the one of the goals of fixing the credit problem, to allay investor concerns over the lack of neutrality?

Or are we jealous that we didn’t get better mortgage rates. I know I am.

Continued here:
[Favoritism Update] Special Interest Groups Rates, Countrywide