Monday, January 23, 2012

Scoop: Buck McKeon's Desperation To Get A Dicey Countrywide Loan Was His Impending Bankruptcy


Courtesy of Darrell Issa's sweeping investigation into Countrywide Financial Corp., "Buck" McKeon (R-CA) was caught with his hand in the cookie jar after being issued a VIP loan in 1998 from the now-defunct lending agency. Crazy, we know, because the only other times we hear of McKeon taking his hand out of his pocket are to hold it palm up when he visits defense industry lobbyists.

Interesting new details are coming to light regarding his 1998 loan. It was a mortgage refinance of a home he purchased one year earlier in Stevenson Ranch (Santa Clarita), California. The strangeness of refinancing your mortgage after only a year also raises some interesting questions, probably answered by looking at his other finances. McKeon was one of five brothers who inherited Howard and Phil’s Western Wear in California. Howard and Phil's had 55 stores at its height, but filed Chapter 11 bankruptcy in 1996 to avoid repaying millions to creditors. The business floundered over the next three years and finally liquidated with a Chapter 7 bankruptcy in 1999, citing many debts, including about $400,000 in unpaid state sales taxes to California.

Some of McKeon's brothers declared personal bankruptcy in addition to corporate bankruptcy. McKeon too was on the verge of personal bankruptcy and desperately needed cash. But because of his bad credit and large debt, he wouldn't have been approved for a refinance the normal way everyone else would be, by going to a bank. Instead, he approached Michael J. Ferrell, shady head lobbyist for the Mortgage Bankers Association of America, who directed him to Angelo Mozilo, CEO of Countrywide. Obviously, he was in real financial trouble, after bankrupting the business he inherited and he needed money fast. A newspaper in McKeon's district, the Antelope Valley Press, obtained Countrywide’s phone logs subpoenaed by Congress and printed excerpts this week. The notes state, "Borrower [McKeon] is a bit difficult to deal with. He seems on the edgy side," and "Borrower wants to close ASAP."

Details emerged that Angelo Mozilo personally intervened in McKeon's loan by directing the loan officer to "take 1 point, no garbage fees, approve the loan and make it a no doc." One point off of a generally 1 percent of the loan, so that’s another $3,000. Mozilo probably didn't want any documentation because they knew McKeon wouldn’t qualify for the loan. "No doc" loans, which were extended to borrowers who had difficulty documenting their income, are termed "liars' loans" by banks because the applicant is trusted (or not) to enter accurate information on the documentation. Thus, no-doc loans are higher- risk and usually come with a higher interest rate. A person familiar with Countrywide's business practices told us that a loan of $315,000 at one point under market and without fees would have lost Countrywide around $12,000. The loan did not appear on McKeon's federal financial disclosures.

Yet McKeon claims he never knew he received a VIP loan or met Angelo Mozilo, despite signing a document indicating he was in the VIP program. Also, McKeon used to be chairman of the board at Valencia Bank and Trust. One would think someone on the verge of bankruptcy with prior executive banking experience would know if he was getting a "good deal" on a loan. We also find it hard to believe that McKeon never met Angelo Mozilo, who lived next to McKeon's district and employed more than 1000 people in the district's processing center. Additionally, Frank Visco, the developer of Countrywide's processing center, former California Republican Party chairman, and close friend of McKeon, was Mozilo's neighbor.

You have to appreciate McKeon's honest corruption when he defended himself in his hometown newspaper by saying, "If I had known we had got a good deal, then I would have gotten all my loans from Countrywide."

Another interesting coincidence is that right around the time of this loan and McKeon's financial problems, he put his wife to work on his campaign as treasurer, paying her between $78,000 and $110,000 per year, which basically means money directly from lobbyists into their joint checking account. USA Today reported McKeon's wife Patricia received the most campaign money of any family member in Congress up to 2006.

McKeon’s Democratic challenger, Dr. Lee Rogers, has called on McKeon to "release all documents relative to the loan so that the public can see the terms and determine for themselves if they believe McKeon when he says he 'had no inkling’ he was receiving preferential treatment.' " Rogers's campaign is picking up steam; we hear they'll have some good fundraising numbers to release for last quarter, but they're raising even more money now. After redistricting, the district is more in play than it has been. With 18% "decline to state" voters, Obama carried the district in 2008, as did Meg Whitman for governor, making it really a swing district.

We hear there are two local issues affecting the election. Cemex, a mining company authorized by the Bureau of Land Management, will be starting to mine for rock in Santa Clarita, threatening the air quality and clogging up roads with 1200 trucks per day. The mine is extremely unpopular locally, with 110 organizations from the Chamber of Commerce to the Sierra Club publicly opposing it. McKeon has refused to introduce a companion bill to Sen. Barbara Boxer's S. 759 to initiate a land swap with Cemex to stop the mine.

In an even weirder twist, McKeon’s campaign-paid spouse Patricia is running for state Assembly against a popular local Republican in the primary for AD 38. This Republican is Scott Wilk, who used to be McKeon's district director but left on not- so-amicable terms over the Cemex issue. The Republican base is fracturing into pro-McKeon and anti-McKeon camps, and there is even a devastating and popular new blog dedicated to Patricia McKeon and the family finances.

Overall, we think the race looks promising for Rogers, a famous doctor, running in one of the few remaining districts in Los Angeles County represented by a Republican in Congress. You can give him a hand here at the DownWithTyranny ActBlue page.

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At 4:41 PM, Blogger Stephen Kriz said...

If you want to learn more about old Buck's corrupt ways, read Jeffrey St. Clair's excellent book, Grand Theft Pentagon. Link here:

At 10:44 PM, Blogger alanala said...

AND his dad took my widowed mother's inheritance when my grandmother died back in the 50's in LA. This included a lot of money and a 1500 acre ranch. We all figured his dad started the 'business' with it. He took care of my grandmother for her last few months and had her will changed. He was a cousin. I learned this researching our genealogy.

Joan Palmer, Bethesda Maryland


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