Internal memo shows Fannie's intense courting of Countrywide, Angelo Mozilo

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Washington Examiner:

Internal memo shows Fannie's intense courting of Countrywide, Angelo Mozilo

08/07/10 5:56 PM EDT

Fannie Mae officials were so assiduous in their courting of Countrywide, the defunct corporation at the heart of the mortgage bubble at the heart of the Great Recession of 2008, that they laid out a 10-point program for the effort in 2004, according to an internal memo obtained by The New York Times.

"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," the Times' Gretchen Morgensen reports.

"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," according to Morgensen.

The internal Fannie Mae memo obtained by Morgensen laid out nine points under the heading of “'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.'”

The Times story also quotes Rep. Darrell Issa, R-CA, who says:

“Lost in the debate over how best to legislate the aftermath of the financial crisis has been the necessity to conduct an inward examination of the too-cozy relationship between government enterprises and private industry. The true nature of this strategic partnership between Countrywide and Fannie-Freddie should be exposed so we can measure the extent to which it fostered the conditions leading to the financial meltdown.”

Issa is the ranking minority member of the House Oversight and Government Reform Committee.

Go here for the full Times story.

http://www.nytimes.com/2010/08/08/business/08gret.html?_r=2&src=busln