Favorable Mortgage Terms

Recent scandals involving favorable mortgage terms to government officials, including former HUD and HHS Cabinet secretaries, illustrate a tricky ethics area worth covering in training. It may not always be obvious that a discounted rate is improper, as mortgage rates and points are negotiable. Buyers with strong credit histories (including many senior government officials) often receive favorable treatment. Nevertheless, such loans create a potential for ethics issues. Portfolio magazine created a "rogue's gallery" of loan recipients. As explained in the Washington Post:

Savings offered under the FOA ["Friends of Angelo" Mozilo, CEO of a mortgage company] program do not appear to amount to more than a few hundred or thousand dollars. But as Countrywide emerged this year as a leading player in the subprime mortgage crisis, Mozilo turned politically radioactive, held up by politicians as the personification of a housing meltdown that has shaken financial markets worldwide.