Consumer Law

Times Article About WaMu's Striking Lending Decisions

By Jeff Sovern

The Times has an amazing article today, By Saying Yes, WaMu Built Empire on Shaky Loans, about Washington Mutual's loan decision-making process.  The article describes how one now-jailed supervisor kept drug paraphernalia on his desk, claims by borrowers were rarely confirmed--no matter how outrageous, and loans were made to many unqualified borrowers.  Just to give the flavor, here are some excerpts, but the article has a lot more of this and puts it in a broader context:

* * * The borrower was claiming a six-figure income and an unusual profession: mariachi singer.

Mr. Parsons could not verify the singer?s income, so he had him photographed in front of his home dressed in his mariachi outfit. The photo went into a WaMu file. Approved.

* * *

?It was the Wild West,? said Steven M. Knobel, a founder of an appraisal company, Mitchell, Maxwell & Jackson, that did business with WaMu until 2007. ?If you were alive, they would give you a loan. Actually, I think if you were dead, they would still give you a loan.?

* * *

On another occasion, Ms. Zaback asked a loan officer for verification of an applicant?s assets. The officer sent a letter from a bank showing a balance of about $150,000 in the borrower?s account, she recalled. But when Ms. Zaback called the bank to confirm, she was told the balance was only $5,000.

The loan officer yelled at her, Ms. Zaback recalled. ?She said, ?We don?t call the bank to verify.? ? Ms. Zaback said she told Mr. Parsons that she no longer wanted to work with that loan officer, but he replied: ?Too bad.?

Full post as published by CL&P Blog on December 28, 2008 (boomark / email).