Obama housing adviser Franklin Raines
NEW YORK – Two Barack Obama advisers, Franklin Raines and James Johnson, received preferential home loans as industry favors, apparently in deference to their executive positions heading Fannie Mae.
Raines and Johnson, as “friends of Angelo Mozilo,” the chief executive of Countrywide Financial Corp. – the now bankrupt high-flying loan originator in the sub-prime mortgage debacle – were funneled millions of dollars for personal home loans. Mozilo himself made exceptions from Countrywide policy to provide the two Fannie Mae CEO’s “sweetheart deals.”
Obama’s outspoken criticism of Mozilo’s exceptionally high compensation is again under attack as hypocritical in view of the preferential loans to Raines and Johnson and the degree to which Countrywide’s failed sub-prime loans contributed to the government takeover of Fannie Mae and Freddie Mac and last week’s mortgage-related crisis on Wall Street.
Countrywide was acquired by Bank of America in January in an emergency rescue purchase involving a $4 billion stock deal.
As WND reported, Johnson earned $21 million in just his last year at Fannie Mae, where he served as CEO from 1991 to 1998. Raines earned $90 million in his five years as Fannie Mae CEO, from 1999 to 2004.
WND also reported Raines and two other top Fannie Mae executives agreed to pay $24.7 million, including a $2 million fine, to settle a civil lawsuit filed in December 2006 that accused them of manipulating Fannie Mae earnings, allowing executives to pocket hundreds of millions in bonuses.
As part of the settlement, Raines was also forced to give up Fannie Mae stock options valued at $15.6 million
Johnson was appointed to head Obama’s vice-presidential selection committee, but he was forced to step down when a controversy surfaced in June concerning alleged millions in questionable real estate loans he had received on favorable terms from Countrywide.
A Washington Post profile published July 17 said Raines was then playing a role advising the Obama presidential campaign on mortgage and housing policy.
The story of the alleged conflict of interest involving the Countrywide loans to Raines and Johnson broke in a Wall Street Journal story published June 7.
Authors Glenn R. Simpson and James R. Hagerty noted that customers who got their Countrywide loans through being “friends” of Countrywide chief executive Angelo Mozilo included Raines and Franklin, “two former CEO’s of Fannie Mae, the biggest buyer of Countrywide’s mortgages.”
A follow-up Wall Street Journal article that led to the resignation of Johnson from heading Obama’s vice presidential selection committee noted he received more than $5 million in loans from Countrywide that were arranged outside the company’s normal underwriting process.
According to the article, Johnson received loans from Countrywide on six properties between 1998 and 2007, some at lower-than-average interest rates.
The article noted that perhaps the most unusual of Johnson’s loans was one for more than $1.5 million for a real-estate project in Big Timber, Mont.
Records showed Johnson’s “total income” at the time was $55,834 a month, while his “total obligations” were $97,708.97 a month, for a total debt ratio of 175 percent.
According to the Journal, Countrywide handled this as a house construction loan and bent the rules by waiving additional down payments. Other rules were waived, including a requirement that Countrywide borrowers have no more than four currently financed properties at a time.
Raines was also a repeat customer at Countrywide while he was Fannie Mae chief executive, receiving four home loans between 1999 and 2003, totaling nearly $4 million.
One of the properties included Raines’ home, called Beechwoods, a 98-year-old seven-bedroom stucco colonial with a pool, a movie theater and a shared tennis court, overlooking a national park.
Josh Gerstein, writing in the New York Sun, noted that on the campaign trail, Obama had criticized Countrywide’s executives, charging, “These are the people who are responsible for infecting the economy and helping to create a home foreclosure crisis. Two million people may end up losing their homes.”
Gerstein also noted a Chicago Tribune report that Obama “fumed” over a total of $19 million in bonuses set to be paid Mozilo and the president of Countrywide, David Sambol.”
“They get a $19 million bonus while people are at risk of losing their home. What’s wrong with this picture?” Gerstein quotes Obama as saying.
“In a written statement issued in March, the senator called the payments ‘an outrage’ and suggested Mr. Mozilo and others had ‘tricked’ homeowners into unaffordable loans,” Gerstein wrote. “‘These executives crossed the line to boost their bottom line,’ Mr. Obama declared.”
WND has also reported a review of Federal Election Commission records back to 1989 reveals Obama in his three complete years in the Senate is the second largest recipient of Freddie Mac and Fannie Mae campaign contributions, behind only Sen. Christopher Dodd, D-Conn., the powerful chairman of the Senate banking committee. Dodd was first elected to the Senate in 1980.
From 1989 to 2008, Dodd received $165,400 in Fannie Mae and Freddie Mac campaign contributions, including contributions from PACs and individuals, followed by Obama, who received $126,349 in such contributions since being elected to the Senate in 2004.