There’s always something to howl about

“But we’ve got to have some regulation!” How else are insiders going to get their mitts onto sweetheart mortgage deals?

Regulation is rent-seeking, Rotarian Socialist graft, and that’s all it ever is. Who sold out the housing market? The regulators, of course.

AP: Countrywide won influence with discounts.

HousingWire: Investigation reveals Countrywide VIP program scope and influence.

Bloomberg: Countrywide Used Loans For Favor With Fannie Mae, Report Says.

I love this bit from the AP story:

Among those who received loan discounts from Countrywide, the report said, were:

—Former Senate Banking Committee Chairman Christopher Dodd, D-Conn.

—Senate Budget Committee Chairman Kent Conrad, D-N.D.

—Mary Jane Collipriest, who was communications director for former Sen. Robert Bennett, R-Utah, then a member of the Banking Committee. The report said Dodd referred Collipriest to Countrywide’s VIP unit. Dodd, when commenting on his own loans, said that he was unaware of receiving preferential treatment but knew his loans were handled by the VIP unit.

The Senate’s ethics committee investigated Dodd and Conrad but did not charge them with any ethical wrongdoing.

—Rep. Howard “Buck” McKeon, R-Calif., chairman of the House Armed Services Committee.

—Rep. Edolphus Towns, D-N.Y., former chairman of the Oversight Committee. Towns issued the first subpoena to Bank of America for Countrywide documents, and current Chairman Darrell Issa, R-Calif., subpoenaed more documents. The committee said that in responding to the Towns subpoena, Bank of America left out documents related to Towns’ loan.

—Rep. Elton Gallegly, R-Calif.

—Top staff members of the House Financial Services Committee.

—A staff member of Rep. Ruben Hinojosa, D-Texas, a member of the Financial Services Committee.

—Former Rep. Tom Campbell, R-Calif.

—Former Housing and Urban Development Secretaries Alphonso Jackson and Henry Cisneros; former Health and Human Services Secretary Donna Shalala. The VIP unit processed Cisneros’s loan after he joined Fannie’s board of directors.

—Rep. Pete Sessions, R-Texas, was an exception. He told the VIP unit not to give him a discount, and he did not receive one.

—Former heads of Fannie Mae James Johnson, Daniel Mudd and Franklin Raines. Countrywide took a loss on Mudd’s loan. Fannie employees were the most frequent recipients of VIP loans. Johnson received a discount after Mozilo waived problems with his credit rating.

The report said Mozilo “ordered the loan approved, and gave Johnson a break. He instructed the VIP unit: ‘Charge him ½ under prime. Don’t worry about (the credit score). He is constantly on the road and therefore pays his bills on an irregular basis but he ultimately pays them.”

Johnson in 2008 resigned as a leader of then-candidate Barack Obama’s vice presidential search committee after The Wall Street Journal reported he had received $7 million in Countrywide discounted loans.

The report said those who received the discounts knew the loans were handled by a special VIP unit.

“The documents produced by the bank show that VIP borrowers received paperwork from Countrywide that clearly identified the VIP unit as the point of contact,” the committee said.

The standard discount was .5 waived points. Countrywide also waived junk fees that usually ranged from $350 to $400.

You insist, contrary to all evidence, that Batman will rush in to save you from the harsh, cruel world. Now you know the market price of Batman’s “integrity” — 50 basis points.

There’s a clue in the air. If you breathe deeply, you just might catch it.


7 Comments so far

  1. Bianca July 6th, 2012 3:11 pm

    As awful as it is and as you pointed out, it is not uncommon. This is the worst part of it all, “Dodd, when commenting on his own loans, said that he was unaware of receiving preferential treatment but knew his loans were handled by the VIP unit.”

    If you didn’t realize you were getting preferential treatment in the VIP unit, you probably should not hold a position where you make important decisions.

  2. Gabe Sanders July 7th, 2012 7:46 am

    All that money spent for campaign contributions normally gets repaid by favors. It sure seems like all politicians can be bought.

  3. Brian Brady July 9th, 2012 10:37 pm

    The best line came from Cato’s write up:

    “But Mozilo, who knew the business Countrywide was really in, told them not only to approve the loan but to give Johnson a discounted rate.”

  4. Greg Swann July 10th, 2012 7:48 am

    I had a complaint by email last week, referencing the Barclay’s Bank LIBOR scandal. It seems that we must have statist regulation in the economy because, even though regulators are corrupt, they’re also inept.

  5. jimi July 13th, 2012 6:57 am

    here’s another budding corrupt practice …
    Investor Demand High in U.S. Foreclosure-to-Rental Pilot
    Reuters (07/03/12) Chadbourn, Margaret
    The Federal Housing Finance Agency’s pilot program for converting government-owned foreclosures into rental housing has attracted “robust” demand, the agency said. Bidders that qualified to buy the REO assets in bulk have been notified, although their identities will not be made public until after the transactions close in the third quarter. The goal of the initiative is to whittle down the huge inventory of seized homes and to curtail losses at Fannie Mae and Freddie Mac, which are regulated by FHFA.

    This really chaffs me!
    First, most residential markets are showing signs of improvement and lower available inventories. Second, the “qualified bidders” that have not been revealed reeks of cronyism. Third, the current bidding process at foreclosure sales is extremely efficient, competitve and transparent – advertised notice of sale, cry the bid, highest bidder wins… it was not a broken system. Fourth, since the terms of sale are “all cash”, most of the foreclosure homes purchased are converted to rental housing already. The remainder are fixed-up and sold to homeowners. What was the problem?

    My take — Because of the MERs fiasco, Freddie/Fannie own too many loans with defective titles. Their foreclosure rights are unenforceable in State courts. The “qualified bidders” will accept the dirty titles(priced accordingly), rent out the houses for the agreed upon time period at an acceptable yield. Meanwhile, they will bring forth quiet title actions to cleanse the deeds, and ultimately sell at big gains. Housing Crony Fascism. I’d love to see the paperwork supporting these sales….

  6. Ivan July 18th, 2012 8:06 am

    There are only few non-corrupt politicians left in this world that are willing to serve the country with all their heart and integrity. Let’s hope and pray that these corrupt practices in the government system will be totally eliminated.

  7. Greg Swann July 18th, 2012 8:44 am

    > Let’s hope and pray that these corrupt practices in the government system will be totally eliminated.

    How has that worked for you so far?

    Here’s an interesting question: Is the state a slave colony or is it a club?

    If it’s a slave colony, we can all stop mewling. The slave-masters will do as they wish, and the individual person’s choice will be to capitulate or die.

    But if it’s a club — which is what is implied by the words “government of the people, by the people, for the people” — one of two outcomes is possible:

    The club can dissolve, or

    It can revise its bylaws to get back to unanimous consent.

    Either way, the center cannot hold.