(Update with comment from panel Republican spokesman)
By Jessica Holzer
Of DOW JONES NEWSWIRES
WASHINGTON -(Dow Jones)- The chairman of a U.S. House panel said he would issue a subpoena Friday for records on subprime lender Countrywide Financial Corp.'s VIP loan program, dropping his resistance to Republican calls for a probe.
Rep. Edolphus Towns, D-N.Y., who heads the House Committee on Oversight and Government Reform, also announced an investigation into predatory practices by the mortgage industry.
In a statement, Towns said he is issuing the subpoena "to gather information about how the program worked and whether it provided special benefits to government officials."
Towns' shift comes after two panel Democrats, Reps. Paul Hodes of New Hampshire and Mike Quigley of Illinois, joined Republicans to push for the probe.
"The American people deserve to know the truth about these lending practices," the Democratic lawmakers wrote in a letter to Towns and Rep. Darrell Issa of California, the panel's top Republican, on Thursday.
The loan program, known as "Friends of Angelo" - a reference to former Countrywide Chief Executive Angelo Mozilo - provided loans to public figures and other favored persons at rates and terms more favorable than what Countrywide offered to the general public. The committee will subpoena Bank of America (BAC), which now owns Countrywide.
Towns received two mortgage loans under the program, The Wall Street Journal reported in August. He contends that he had no knowledge that he was in the program and didn't receive any special treatment. For months, he has refused calls from Issa and other panel Republicans to subpoena records from the program.
The committee's Republican spokesman Frederick Hill issued a statement saying no subpoena has been issued yet to Bank of America and no agreement has been reached between Republicans and Democrats on the wording.
"Majority and minority staff members continue to discuss a draft subpoena put forth by the majority," Hill said.
The mortgage industry investigation will target the largest U.S. mortgage lenders, including Wells Fargo (WFC), JPMorgan Chase (JPM) and Bank of America.
-By Jessica Holzer, Dow Jones Newswires; 202-862-9228; jessica.holzer@dowjones.com