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"Saying Yes, WaMu Empire Built on Shaky Loans"
Old 12-29-2008, 09:57 AM   #1
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"Saying Yes, WaMu Empire Built on Shaky Loans"

It should come as no surprise that Washington Mutual Bank had to be rescued by JP Morgan Chase after reading some of the unethical acts of its employees in their quest for greed.
  • They approved loans for school teachers who claimed incomes that rivaled stock brokers.
  • They verified the income of a mariachi singer who claimed a six-figure income by photographing him dressed in a mariachi outfit standing in front of his home.
  • They approved mortgages for babysitters who claimed incomes that were as high as college presidents.
  • John Parsons who was in charge of screening loan applications in WaMu's San Diego office was known for leaving drug parapharnalia strewn over his desk while he snorted methamphetamines during his apparent scrutiny of home mortgage applications.
  • WaMu paid kickbacks of more than $10,000 each for real estate agents who referred their customers to its bank for mortgages.
  • Kerry Killinger, WaMu's chief executive received $88 Million in compensation between 2001 and 2007.
  • In 2003 WaMu embraced the mantra in its advertising, "The power of yes" meaning they would basically approve almost any home loan application. Employees often made jokes about problematic loans that somehow became "approved."
  • Bank tellers in Tampa were ordered to push home equity loans and those who fell short were placed in a phone bank room of 20 people who then called customers selling home loans.
  • Ms. Zaback, a San Diego WaMu employee whose job was to collect and scrutinize loan applications from Southern California offices said that most of their loans approved contained only the borrowers' name, social security number and "stated income and assets."
  • Ms. Zaback once became concerned about an application from a gardener who listed his his monthy income as $12,000, so she took the paperwork to Mr. Parson's office. He used the past example of the "Mariachi Singer" and told her to take a photograph of the gardener standing in front of his clearly marked company truck.
  • On another occasion, Ms. Zaback went to Mr. Parsons with a verification stating a borrower had $150,000 in the bank and she later called the bank only to find out the actual amount was actually $5,000. She told him she could no longer work with the loan officer who changed the bank verification and he told her it was "too bad." The loan was later approved. Shortly afterward Mr. Parsons disappeared and Ms. Zaback learned he was in jail for burglary and drug possession.
  • WaMu's adjustable rate mortgages increased from 25% in 2003 to 70% in 2006. In 2005 Mr. Killinger's pay was $19 Million and for 2006 it was $24 Million during this increased push for ARM loans.
  • Thomas Ramirez, who headed a retail home loan office in Downey, California focused on Latino customers who spoke very little English. Real estate customers who referred the borrowers to WaMu were paid large commissions. The agents rarely explained the loan terms and said their was a, "minimum payment which was an outright lie." Mr. Rameriz's team of 20 sold $1 Billion in home loans in 2004.
  • After the success of Mr. Ramirez's office, WaMu opened a second retail home loan office in Downey complete with loan processors,underwriters, and appraisers. Soon real estate agents from all over Southern California deluged the new office with some holding as many as 6 or 7 new loan applications. WaMu's generous commissions proved to be extremely inticing.
  • By 2005 WaMu was accepting and approving mortgage applications with little or no documentation as long as credit scores were adequate. They even sent out fliers that said, "A thin file is a good file."
  • In 2007 WaMu reported a $67 Million loss and shut down in subprime mortgage unit. By April 2008, it reported a $1.14 Billion loss with a loan loss reserve of $3.5 Billion.
  • During Kerry Killinger's tenure with WaMu, he earned over $100 Million. In September, he was forced into retirement. Later that month after WaMu began "buckling" under $180 in mortgage debt, regulators seized the bank and sold it to JP Morgan Chase for $1.9 Billion. At its peak, it had been valued at $40 Billion.
  • In June, WaMu excutives were asked to give back some of their money, but to date none have honored this request. mutual&st=cse&scp=2

"I went to the woods because I wished to live deliberately... and not, when I came to die, discover that I had not lived."

--Henry David Thoreau
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Old 12-29-2008, 10:26 AM   #2
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Sometimes I wish I could have gotten in on the action... $10K referrals? dang....

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Old 12-29-2008, 12:10 PM   #3
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I read the full article in the NYT and have to say it was an excellent read though the content was scary.

What peeves me more than anything is that those who instituted the practice get off scot free.

I be a girl, he's a boy. Think I maybe FIRED since July 08. Mid 40s, no kidlets. Actually am totally clueless as to what is going on with DH.
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Old 12-29-2008, 12:58 PM   #4
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I agree DangerMouse! Don't they all sign their names under penalty of law? Fraud?
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Old 12-29-2008, 01:15 PM   #5
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Originally Posted by DangerMouse View Post
I read the full article in the NYT and have to say it was an excellent read though the content was scary.

What peeves me more than anything is that those who instituted the practice get off scot free.
Great article, even if it makes you want to ship them all off to a prison in Uzbekistan (only after the prison official have stated that prisoners are properly feed, clothed, and not tortured ).

My favorite is the irony of the opening quote.
We hope to do to this industry what Wal-Mart did to theirs, Starbucks did to theirs, Costco did to theirs and Lowe’s-Home Depot did to their industry. And I think if we’ve done our job, five years from now you’re not going to call us a bank.”
— Kerry K. Killinger, chief executive of Washington Mutual, 2003
Sure enough WaMu is no longer a bank five years later. Luckily with the exception of BofA all the banks I own/owned actually were concerned that the money they loaned got paid back.
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Old 12-29-2008, 05:40 PM   #6
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I read this yesterday and also found several other articals describing WaMus's tactics. Here is a list of several other articals in the series
The Reckoning - Series - The New York Times
...with no reasonable expectation for ER, I'm just here auditing the AP class.Retired 8/1/15.
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Old 01-01-2009, 07:51 AM   #7
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Originally Posted by Bimmerbill View Post
Sometimes I wish I could have gotten in on the action... $10K referrals? dang....
NPR had a special earlier this year, and it was enlightening to hear that some mortgage brokers felt their lifestyle was being crimped because their monthly income had dwindled to only $25,000 a month.

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