June 17 (Bloomberg) -- Senator Kent Conrad said he unknowingly received preferential terms on a mortgage from Countrywide Financial Group after he was unexpectedly put on the telephone with the company's chairman, Angelo Mozilo.

Conrad, a North Dakota Democrat, said he called his friend James Johnson in 2002 for advice on where to get a mortgage, and the former Fannie Mae chief happened to be with Mozilo. Conrad said Johnson handed the phone to Mozilo, and they talked for about 30 seconds without discussing the specifics of any loans.

Conrad said Mozilo gave him a phone number to call and he spoke with a ``young'' loan officer, ``not some big high-powered executive.''

Conrad called the conversation with Mozilo ``serendipity.'' ``It's an odd set of events,'' Conrad said in an interview in Washington. ``I know this has an appearance that's unfortunate, but honestly I didn't do a single thing here that's untoward.''

The Senate ethics committee has begun looking into the matter, Conrad said. Conrad and Connecticut Democrat Christopher Dodd, who oversees the U.S. mortgage industry as chairman of the Senate Banking Committee, received loans through Countrywide's ``V.I.P.'' program, which waived points, fees and borrowing rules for prominent people, Portfolio magazine reported June 12.

Dodd said today at a news conference in Washington that he was told in 2003 that he was being placed in the company's ``V.I.P'' program.

Never Asked

He said he never asked what that entailed and assumed it was a ``courtesy'' that had nothing to do with his position in government. Dodd said he was never told it might include more favorable loan terms. He also said he never talked to Mozilo or ``any higher-ups or any senior people within Countrywide'' regarding his two loans with the company. Dodd also said the rates he received were ``well within the band of rates that were being offered across the country.''

Conrad said he has turned over documents to the Senate ethics committee, which he said has begun looking into whether the matter violates congressional gift rules. He said he doesn't know when the committee will conclude its work. Texas Republican Senator John Cornyn, the top Republican on the ethics panel, declined to comment on the matter.

Congress is considering ways to help stem foreclosures amid the worst housing slump since the Great Depression. Lawmakers are weighing creation of a Federal Housing Administration program to insure refinanced mortgages for borrowers after lenders reduce loan principal.

Two Loans

Conrad received two loans from Countrywide, one for $1 million to refinance a vacation home and another for an eight- unit apartment building in Bismarck, North Dakota, according to Portfolio. Countrywide Chairman Angelo Mozilo told an employee to ``take off one point'' from the vacation-home loan, which saved Conrad $10,700, the magazine said. The apartment loan violated Countrywide's policy of not loaning money for buildings with more than four units, Portfolio said. The story said Mozilo told an employee to make an exception for Conrad.

Dodd got two loans in 2003, borrowing $506,000 to refinance his Washington townhouse and $275,042 to refinance a house in East Haddam, Connecticut, Portfolio reported. Countrywide waived three-eighths of a point, or about $2,000, on the first loan, and one-fourth of a point, about $700, on the second, the magazine said, citing internal documents.

`Standard' Rates

Dodd said he received ``standard'' rates on both loans. He said he received a five-year adjustable rate mortgage with a 4.25 percent interest rate on the Washington home. Dodd said he took out a 10-year adjustable rate mortgage on the Connecticut home with a 4.5 percent interest rate.

A spokesman for Johnson didn't immediately respond to a request for comment. At the time of Conrad's mortgage application, Johnson was a consultant for Washington-based Fannie Mae, the largest U.S. mortgage-finance company. Johnson was chairman of Fannie Mae from 1991-99.

A spokesman for Countrywide didn't immediately return a call seeking comment.

Conrad's account came in response to a question asking why he spoke with the head of the company about a personal loan if he wasn't seeking preferential treatment.

Conrad said he has since given the equivalent of the amount of money he saved from Countrywide to charity and paid off an outstanding apartment loan he had received from the company.

To contact the reporter on this story: Brian Faler in Washington at bfaler@bloomberg.net

Last Updated: June 17, 2008 17:57 EDT