Cisneros says he didn't get special treatment
Henry Cisneros resigned from the Countrywide Financial Corp. board last fall, but he hasn't escaped the harsh spotlight shining on the company in the aftermath of the mortgage meltdown that began last year.  Some media reports would have the public believe that Cisneros, the former San Antonio mayor and U.S. housing secretary, got special rates on loans from Countrywide alongside two U.S. senators — Christopher Dodd, D-Conn., and Kent Conrad, D-N.D. — now ensnarled in an ethics scandal. Special treatment such as below-market rate loans would violate the Sarbanes-Oxley corporate governance law for directors.

Cisneros says he didn't get special treatment
08/09/2008
David Hendricks

Henry Cisneros resigned from the Countrywide Financial Corp. board last fall, but he hasn't escaped the harsh spotlight shining on the company in the aftermath of the mortgage meltdown that began last year.

Some media reports would have the public believe that Cisneros, the former San Antonio mayor and U.S. housing secretary, got special rates on loans from Countrywide alongside two U.S. senators — Christopher Dodd, D-Conn., and Kent Conrad, D-N.D. — now ensnarled in an ethics scandal.

Special treatment such as below-market rate loans would violate the Sarbanes-Oxley corporate governance law for directors.

Although it appears that other former Cabinet members, such as former Housing Secretary Alphonso Jackson, helped themselves to discounted Countrywide mortgages — called V.I.P. or “Friends of Angelo” loans after Countrywide's ex-chief executive, Angelo Mozilo — Cisneros denies any special treatment. The only evidence available indicates he is telling the truth.

The August issue of Condé Nast Portfolio magazine listed Cisneros as a V.I.P. loan recipient, along with several other people. Buried near the end of the long article are Cisneros' quotes that he took steps to avoid favorable terms. Discussing the Portfolio article last weekend, Fox News called Cisneros a V.I.P. loan participant, without any caveats.

“I did not receive any favorable treatment,” Cisneros said flatly this week, adding he was unaware of the V.I.P loan program while a board member.

Cisneros cited his loan mentioned by the Portfolio article — a $60,000 home-equity line of credit he took out on Nov. 26, 2003, at a 6.5 percent interest rate. Bankrate Inc. confirmed that was in line with prevailing market rates at the time. If anything, 6.5 percent was on the expensive side.

Cisneros took out several mortgage loans during his 2001-2007 tenure on the Countrywide board. Because he owns several properties, Cisneros said he does not remember the details.

The Countrywide officer who processed Cisneros' loans, David Konevesky, declined to discuss the loans, deferring to the media office, now operated by Bank of America Corp. The bank recently acquired Countrywide after the mortgage giant's stock collapsed last year and as an FBI investigation started into Countrywide's lending practices.

The Bank of America media office also declined to reveal Cisneros' loan details, “due to privacy restrictions or for other reasons.”

The V.I.P. loan program overseen by Mozilo was astonishingly brazen in the company's attempts to lobby its interests in government, judicial and business circles. Fees that reduced interest rates, called points, were waived. Initial rates were reduced if market rates later fell. Loan amounts that exceeded Countrywide's income limits were approved, and loan processing was accelerated. The special treatment sometimes shaved thousands of dollars off the loan costs.

Board members were given a number to call whenever they had personal mortgage needs. Konevesky, who handled Cisneros' loans, was not the same loan officer, Robert Feinberg, who provided information on V.I.P. loans to Portfolio magazine.

Cisneros, now chairman of CityView, which provides home builder financing, said he believes the magazine listed him as a V.I.P. loan participant because he was a prominent board member.

Cisneros could not have arranged his loans through a regular Countrywide loan officer because of accountability and legal obligations, said Ralph Ward, publisher of the online Boardroom Insider site, which discusses corporate governance issues.

Cisneros said he wanted to do his business at Countrywide to show confidence in the company. “If you are on the board, you ought to own stock and you ought to do business with it. Imagine if I had taken my business somewhere else,” Cisneros said.

“It's a compelling argument,” Ward said.

Cisneros resigned from the Countrywide board on Oct. 18, 2007.

He may have done all the right things during his tenure on the board. And he continues to champion the just cause of affordable housing.

But reputations come from the company one keeps. Cisneros' association with Mozilo's Countrywide won't exactly shine when Cisneros' legacy is compiled.

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