Attorney General Richard Blumenthal decries the subprime mortgages that Countrywide Financial Corporation originated. In 2008, he sued the company for “pushing consumers into deceptive, unaffordable loans.”
But does he also have money in them?
Aides to his opponent, Linda McMahon, say yes. They point to Blumenthal’s financial disclosure report, which shows the Democrat has at least $3 million invested with Blue Ridge Limited Partnership, a hedge fund in New York. In 2009, the fund bought a significant stake in PennyMac, a group of former Countrywide executives who buy distressed loans and rework them to make a profit. The New York Times profiled the company last year:
“It is sort of like the arsonist who sets fire to the house and then buys up the charred remains and resells it,” said Margot Saunders, a lawyer with the National Consumer Law Center, which for years has sought to place limits on what it calls abusive lending practices by Countrywide and other companies.
In PennyMac’s defense, it helps some people stay in their homes:
Phone operators for PennyMac — working in shifts — spend 15 hours a day trying to reach borrowers whose loans the company now controls. In dozens of cases, after it has control of loans, it moves to initiate foreclosure proceedings, or to urge the owners to sell the house if they do not respond to calls, are not willing to start paying or cannot afford the house. In many other cases, operators offer drastic cuts in the interest rate or other deals, which PennyMac can afford, given that it paid so little for the loans.
And in Blumenthal’s defense, Blue Ridge doesn’t discuss its investments with its clients. A footnote in his report explains, “The fund maintains that the list of assets is proprietary information and will not release it.” McMahon’s aides made the discovery by sifting through the Securities and Exchange Commission’s files. Still, it might behoove the attorney general to be less sanctimonious in his pronouncements on questionable moneymaking.