Documents detail the terms of a discounted mortgage loan received by U.S. Rep. Howard McKeon from the now-defunct Countrywide Financial Corp. under a VIP program, according to a published report.
McKeon received a $315,000 mortgage refinance in 1998 as his family-owned business, Howard & Phil's Western Wear, was going through a Chapter 11 bankruptcy, the Los Angeles Times said Sunday ( http://lat.ms/xzqdTd).
The newspaper cites financial disclosures and bankruptcy filings that show the Southern California Republican saw his income plummet in the years before refinancing his Stevenson Ranch home. In spite of his limited cash flow, McKeon received a favorable rate and wasn't required to produce documentation proving he could repay the mortgage.
The terms were ordered by Countrywide chief executive Angelo Mozilo, according to documents subpoenaed for a House inquiry.
House investigators are trying to determine whether McKeon and three other congressmen, including fellow California Republican Elton Gallegly, broke rules against gifts when they received loans as part of a VIP program where some of the favored customers were known as "Friends of Angelo." The House ethics panel will also investigate whether they performed any favorable actions for the lender.
The other two congressmen are Rep. Pete Sessions, R-Texas, and Rep. Edolphus Towns, D-N.Y. None of the lawmakers has been accused by the ethics panel of any wrongdoing, and may never be if they convince investigators they had no knowledge of the discounts. Preferential terms are not illegal but can be looked upon as a gift and must be declared in financial statements.
The Times said one email written by a Countrywide staffer included this instruction on McKeon's loan: "Per Angelo _ take off 1 point, no garbage fees, approve the loan and make it a no doc." Another notation recorded by a Countrywide employee said McKeon seemed "edgy" and "wants to close ASAP," according to documents.
McKeon's office said McKeon had never met or spoken to Mozilo and was "shocked and angry to hear this, as he had no knowledge of the Friends of Angelo designation." In an interview with the Times last month, McKeon said he had paid the "garbage fees" and did not get a point off on the loan.
"In other words, I didn't get a deal," he said.
Some mortgage experts who reviewed loan documents provided to the Times by McKeon's office disputed that. None of the reviewers were told who the borrower was.
Countrywide was the nation's largest mortgage company and played a major role in the U.S. financial crisis by issuing subprime loans.
Mozilo in 2010 agreed to more than $67 million in penalties in a settlement with the Securities and Exchange Commission.