Internal memorandum lays out the pursuit of CountryWide and its sub-prime loans. Fannie Mae executives paid themselves millions for this brilliant strategy, you and I are paying for it. Sounds like government to me.
Outwardly, Fannie and Freddie wrapped themselves in the American flag and the dream of homeownership. But internally, they were relentless in their pursuit of profits from partners in the mortgage boom. One of their biggest and most steadfast collaborators was Countrywide, the subprime lending machine run by Angelo R. Mozilo.
Countrywide was the biggest supplier of loans to Fannie during the mania; in 2004, it sold 26 percent of the loans Fannie bought. Three years later, it was selling 28 percent. What Countrywide got out of the relationship was clear — a buyer for its dubious loans. Now the taxpayer is on the hook for those losses.
But what was in it for Fannie?
An internal Fannie document from 2004 obtained by The New York Times sheds light on this question. A “Customer Engagement Plan” for Countrywide, it shows how assiduously Fannie pursued Mr. Mozilo and 14 of his lieutenants to make sure the company continued to shovel loans its way.
Nine bullet points fall under the heading “Fannie Mae’s Top Strategic Business Objectives With Lender.” The first: “Deepen relationship at all levels throughout CHL and Fannie Mae to foster alignment and collaboration between our companies at every opportunity.” (CHL refers to Countrywide Home Loans.) No. 2: “Create barriers to exit partnership.” Next: “Disciplined Risk/Servicing Management” and “Achieve Fannie Mae Profitability Goals.”
(Later in 2004, by the way, the Securities and Exchange Commission found that Fannie had used improper accounting and ordered it to restate its earnings for the previous four years. Some $6.3 billion in profit was wiped out.)
The engagement plan also recommends ways that Fannie executives should mingle with Countrywide’s top management, because “fostering more direct senior level engagements with key influencers throughout their organization will be beneficial in ensuring strategic alignment and building organizational loyalty.”
RECOMMENDATIONS included conferring with Mr. Mozilo at Habitat for Humanity golf tournaments and Mortgage Bankers Association conventions. Franklin D. Raines, then Fannie’s C.E.O., and Daniel H. Mudd, then its chief operating officer, were advised to see Mr. Mozilo twice a year. “We will be successful when Angelo influences the industry or his organization on our behalf,” the document says. Mr. Raines didn’t respond to e-mails requesting comment last Friday; he left Fannie in December 2004.
The memo advised pursuing other Countrywide executives: “Deep Rapport” should be the goal with David E. Sambol, the lender’s president, but because he did not “heavily attend outside events” Fannie executives should “look for opportunities for meetings” at Countrywide headquarters.
“We will be successful if we can foster ongoing communication channels that allow us to understand and leverage Sambol’s priorities and demonstrate our commitment to making him successful,” the memo stated. Mr. Sambol and Mr. Mozilo could not be reached for comment.