In an editorial today, the Wall Street Journal calls for an investigation into the sweetheart loans given by Countrywide to Obamaican Jim Johnson:
The disclosure about Mr. Johnson and his successor as Fannie CEO, Franklin Raines, raises serious questions about the extent to which favorable mortgage pricing contributed to Countrywide’s rise and fall. At a minimum, a regulatory probe is warranted.
And the news pages of the WSJ have uncovered why. A special “Friends of Angelo” loan program:
Perhaps the most unusual of Mr. Johnson’s loans was one for more than $1.5 million last year for a real-estate project in Big Timber, Mont. At the time he got the loan, what the records indicate were Mr. Johnson’s monthly obligations were nearly twice his stated monthly income, according to documents and to people familiar with the matter.
The records say Mr. Johnson’s “total income” was $55,834 a month, while his “total obligations” were $97,708.97 a month. The result was a total debt ratio of 175%, which Countrywide’s records say was “too high.”
Countrywide handled this as a house construction loan, which meant that Mr. Johnson wasn’t required to make a down payment apart from the $240,000 investment he had already made in raw land and a payment for construction. A requirement for a second appraisal was waived by Mr. Gissinger.
The loan’s size also exceeded Countrywide rules, but that limit was overridden as well. The document indicated that the size limit was $1.5 million for a second home. In addition, Countrywide borrowers are supposed to have no more than four currently financed properties at a time. Countrywide waived that rule, too. Mr. Johnson was in the processing of selling one of his properties.
“The borrower of this loan is the former CEO of Fannie Mae,” Countrywide records state. “This is a very high-profile and visible loan that needs . . . immediate attention.”