Further Consequences of McKeon's Discounted Countrywide Loan
The federal government today announced a $1-billion civil lawsuit against Bank of America for fraudulent lending practices of its Countrywide unit, which was acquired in 2008 at the height of the financial crisis.
The government alleges that Countrywide engaged in an well-coordinated scheme to fraudulently deceive mortgage finance giants Fannie Mae and Freddie Mac into believing the company’s risky loans were safe and sound.
The suit charges Bank of America, via Countrywide, engaged in a “scheme to defraud the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”) (collectively, “government sponsored enterprises” or “GSEs”) in connection with Countrywide’s residential mortgage loan business.”
Countrywide handed out loans to consumers like candy to kindergarteners, falsifying incomes and failing to verify employments, flagrantly disregarding the recipients’ ability to pay it back — and then covered up the crimes in their reports to Fannie and Freddie, giving the impression that sound underwriting standards were employed.
By deceiving the GSEs about the quality of the loans, Countrywide inflated the mortgage balloon, which directly led to the housing crisis and ensuing recession.
These illegal lending practices and the subsequent lawsuit are direct consequences of the bribes Buck McKeon and other lawmakers accepted from Countrywide as part of the “Friends of Angelo” VIP loan program, where members of congress were given personal discounted loans in exchange for votes favorable to the lender.
In July 2012, the House Oversight and Government Reform Committee, following a three-year investigation, released a report that confirmed existing allegations that McKeon received preferential treatment from Countrywide when obtaining a $315,000 mortgage loan in October 1998.
Through the lender’s “VIP Program,” Countrywide reduced the interest on McKeon’s loan by 1 percent, waived all processing fees and did not require any income documentation.
Many watchdog groups and private citizens, including Dr. Lee Rogers, McKeon’s challenger in the contest for California’s 25th District, contend the VIP loan influenced McKeon’s vote to raise Federal Housing Administration loan limits in 1998. Higher loan limits was “one of the policies that helped lead us to the housing market crash of 2008,” Rogers wrote in a July 9 op-ed in the Santa Clarita Valley Signal.
The following timeframe certainly aligns with that assertion:
On Oct. 6, Congress passed HR 4194, which increased the FHA loan maximums as an amendment to a Veterans Affairs authorization bill. McKeon voted “yes” on that measure.
On Oct. 7, McKeon’s loan was approved and he was sent the “opening package” of loan documents indicating the VIP team had processed the loan.
The McKeon-Countrywide scandal has had far-reaching and devastating effects that will still be felt years from now.
“Countrywide was the poster child for the problems that precipitated the financial crisis,” said Kevin Stein, associate director of the San Francisco-based California Reinvestment Coalition.
“We’re still seeing the effects in terms of people going into foreclosure as a result of the Countrywide practices,” Stein said. “People are still suffering.”
Taxpayers have spent $170 billion to keep Fannie and Freddie afloat, as part of the TARP bank bailout program [Buck McKeon voted to support], and it could cost $260 billion more to support the companies through 2014 after subtracting dividend payments to taxpayers, according to the government.
– LA Times
If Countrywide was the ”Poster Child” for the financial crises, then McKeon certainly qualifies as the “Poster Bastard Child.” In addition to the sweetheart deal on the mortgage, McKeon received thousands in campaign contributions from Countrywide. A recent analysis by the Center for Responsive Politics showed that McKeon was “among the top ten all-time recipients” of Countrywide cash.
Buck McKeon’s corruption led directly to the financial meltown and ensuing recession. Let’s clean up Washington by doing a little housecleaning here at home.
Replace Buck McKeon with Dr. Lee Rogers on November 6th.
The Buck Stops Now
Defeat Buck McKeon