Illinois AG sues Countrywide. More questions for Obama (Updated)

Is Wednesday Sen. Barack Obama (D-Ill.)'s "unlucky" day? It was a mere two weeks ago, on Wednesday, June 11, 2008, that MSNBC commented Sen. Obama gave the "worst answer" he had "ever given in print."

The question in question was about Jim Johnson, the former head of Fannie Mae, one of Obama's picks to select his vice presidential running mate, who had been "exposed as a Washington insider extraordinaire and the recipient of discounted loans through Countrywide Financial Corp."

MSNBC described Obama's response as "odd."

"Well, look ... first of all, I am not vetting my vice presidential search committee for their mortgages."

"It seems that one of the political mavens Sen. Obama had scouting for a running mate enjoyed some fishy ties to Countrywide Credit, a key player in the subprime collapse," Paul Greenberg wrote.

Naturally the country's New Hope waved off his veep-hunting scandal, explaining that he couldn't be expected to investigate his advisers' real estate deals. Of course not, especially since he didn't even investigate his own with Tony Rezko, that fellow pillar of the Daley machine in Chicago. Well, we can't say we weren't warned. Sen. Obama told us he was the candidate of Audacity.

Today, Wednesday, June 25, 2008, Countrywide, and that Obama connection, are back in the news.

The office of Illinois Attorney General Lisa Madigan, "which began an investigation into the business practices of Countrywide Financial Corp." in September 2007, alleges in a 78-page draft complaint that "it has found enough evidence of wrongdoing that it plans to file a civil suit against the mortgage lender and its chief executive, Angelo Mozilo."

The complaint, which will be filed early June 25, 2008, in Cook County Circuit Court, "charges Countrywide with one count of fraud and deceptive business practices and one count of violating the Illinois Fairness in Lending Act," Lorene Yue reported for Crain's Chicago Business.

Ruth Simon reported in the Wall Street Journal, that Illinois also alleges that Countrywide:

...loosened its underwriting standards, structured loans with "risky features" and engaged in "marketing and sales techniques" that incentivized employees and mortgage brokers to push loans whether or not homeowners had the ability to repay them.

The complaint says the company's actions were driven by its desire to boost market share and to satisfy Wall Street's appetite for mortgage securities. "Investor demand and secondary market valuation...became the primary concern when determining what kinds of loans to market and sell and at what price, rather than the consumers' ability to repay the loans," said the complaint. [snip]

In an interview, Illinois Attorney General Lisa Madigan said Countrywide "broke the law and we plan to hold them accountable for that." She added that Countrywide's actions have led to widespread foreclosures in her state and have wrecked havoc around the world. "The impact on individual homeowners and communities and the country and the global economy is unbelievable."

Ms. Madigan says she is asking that all Countrywide loans originated using "unfair and deceptive" practices be rescinded or modified in some way, even if Countrywide has to repurchase the loans. She is also asking that her office be given 90 days to review any loans that are currently in foreclosure or that are moving toward foreclosure. As part of its investigation, the Illinois attorney general's office interviewed about 30 former Countrywide employees and mortgage brokers and reviewed more than 100,000 pages of documents, Ms. Madigan said.

Crain's reports:

"From 2006 to 2007, all foreclosure complaint filings in Cook County increased by 46%," the suit said. "For this same period, however, Countrywide Home Loans Inc.’s foreclosure complaint filings increased by 117%."

The suit claims that Countrywide foreclosed on at least 2,534 Cook County homes between January 2004 and June 2008.

Oh, by the way, did RW forget to mention that "speculation" was "already rampant" back in March 2008 about who Illinois Gov. Rod Blagojevich might appoint to fill Sen. Obama's U.S. Senate seat should he be elected president and leave office in January 2009? Madigan, who served 1998 through 2002 in the Illinois Senate with Obama, is reputed to be on the short list.

In light of possible impeachment proceedings against Gov. Blagojevich, in conjunction with those same Operation Board Games federal fraud corruption charges that recently took down Antoin "Tony" Rezko, Sen. Obama's political patron and personal real estate fairy, it is also rumored that Madigan might replace him.

It should also be noted that in his Wednesday, June 11, 2008, interview about Johnson, Sen. Obama promptly threw him into the quickly disappearing space under the bus:

“Jim Johnson has a very discrete task,” Obama continued, “as does Eric Holder, and that is simply to gather up information about potential vice presidential candidates. They are performing that job well, it’s a volunteer, unpaid position. And they are giving me information and I will then exercise judgment in terms of who I want to select as a vice presidential candidate.

“So this - you know, these aren’t folks who are working for me,” Obama said. “They’re not people you know who I have assigned to a job in a future administration and, you know, ultimately my assumption is that, you know, this is a discrete task that they’re going to performing for me over the next two months.”

Johnson has since stepped down. The Los Angeles Times wrote:

[Obama] and the campaign could sense the lasting legs this story of the wealthy Johnson getting special insider loan rates from Countrywide as a "friend of Angelo's," Angelo Mozilo, the co-founder of Countrywide. That's the company Obama has criticized by name as bearing a large responsibility for the current loan crisis.

One last thing — The Politico has asked all 100 U.S. senators to voluntarily answer three questions about their mortgages, although they are not required to do so.

But amid allegations that Countrywide Financial Corp. offered special mortgage deals to two senators, it’s suddenly useful to know who has been lending money to the members of the greatest deliberative body in the world.

The Senate Ethics Committee has already launched an investigation into the preferential treatment afforded to the two senators in question, Chris Dodd (D-Conn.) and Kent Conrad (D-N.D.), and leading Republicans in the House have called for a wider investigation into whether other lawmakers received any discount rates on their mortgages.

The three questions are:

1.Who is the senator's home mortgage lender (or lenders, if the senator has more than one residence)?

2. Whom did the senator contact to arrange the loan?

3. Did the senator receive any special terms?

Sen. Obama reported that he contacted his banker to arrange his mortgage loan, which is with Northern Trust. He said that he had not received any special terms. He also did not volunteer any additional information about that June 2005 $1.3 million loan.

Update: "Sen. Christopher Dodd, D-Conn., received $20,000 in campaign contributions from Countrywide Financial Corp. over the past two decades, more than any senator except Barack Obama, D-Ill., who received $22,900 in that period," Steve Gilbert reported June 26, 2008, in Sweetness & Light.