'The Reckoning' takes on Washington Mutual

If you missed it, Jim Rainey had a piece in Sunday's L.A. Times about that New York Times series "The Reckoning." L.A. Land readers may recall that we had posts  on the part entitled "White House Philosophy Stoked Mortgage Bonfire" and the subsequent White House apoplexy.

More interesting to me than a rehash of that dust-up was the latest installment of the series that ran Dec. 27 when I was off, "By Saying Yes, WaMu Built an Empire on Shaky Loans."

The lead:

SAN DIEGO — As a supervisor at a Washington Mutual mortgage processing center, John D. Parsons was accustomed to seeing baby sitters claiming salaries worthy of college presidents, and schoolteachers with incomes rivaling stockbrokers’. He rarely questioned them. A real estate frenzy was under way and WaMu, as his bank was known, was all about saying yes.

Yet even by WaMu’s relaxed standards, one mortgage four years ago raised eyebrows. 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.

I don't know how I can still be surprised by anything, but that one was a real head-shaker to me.

-- Lauren Beale

Thoughts? Comments?

Photo: The entrance to a Washington Mutual branch in Seattle in September. Credit: Ted S. Warren / Associated Press

Comments

[Lou]

I worked for a subprime lender and to this day when I tell people that all borrowers needed to do was simply "state" what their income was and what was in their bank, people think I'm full of it. They cannot believe that billion dollar companies would have such assinine underwriting standards. Well believe it. This story of the Mariachi band member was typical of the mortgage industry. Also do you think all the WaMu shareholders would like to know that one of thier high level managers is a meth addict?

[Renter in OC]

He was earning six figure pay by singing "Que Sera Sera" just like everyone involved during the boom time from real estate agents, mortgage bankers, to investment bankers in wall street. Now he is singing "La Cucaracha!" This cockroach is dead!

[Laker]

That is the reason WAMU was given for free ($1.6Billion compared to 300 billion in assets) to Chase...
they got so much toxic loans that mostly haven't even stated to default.
Same story with Indymac and many others (Citi, CW, etc).

[sailor7x]

THE POWER OF YES!!!

[JBA12621]

This is nothing. I worked for a mortgage company where all that was required for self-employed borrowers were 3 reference letters. It was always funny (since I looked for fraud in files) when I saw the same letters over and over again in different files. I flagged them and declined them, only to be overwritten by the managers. And they wonder why the mortgage industry crashed and burned and they closed down.......

[syscom3]

Too bad we cant throw these crooked loan officers into jail.

[mfaster]

how much paid jp morgan for this advertising?

[JS]

Syscom3 - it's not the "crooked loan officers", it's the lying borrowers. These are the people Obama and Pelosi want to keep from losing their homes.

Investment bankers found a way to turn lead into gold. WAMU was only making lead, and likely knew it, but they had converted so much of it into gold, they saw no reason to stop. That's capitalism, for better or worse. And the meaning of the phrase, "Buyer Beware".

Now, the self-correcting side of the system is bringing things back, but our elected officials are falling all over themselves to prevent the "correction", or at least try to control it and minimize the negative consequences.

The law of economic gravity states that any artificial increase in value (bubble) is followed by a reciprocal decrease in value. Obama will inherit the task of defying gravity.

Good luck with that.

[TrojanDLA]

Wasn't "YES WE CAN!" Wamu's mantra before Obama took it?

[RZ]

WAMU as well as the other lenders are very much to blame here. BUT, at what point do we hold the borrowers responsible for lying? Their willingness to go along with the fraud is another reason for the bubbles rise and subsequent burst, and frankly I don't understand why no one wants to blame the consumers for their role in this. It takes two to tango, and all of these liars were willing ballroom partners to WAMU and the other lax lenders.

[coakl]

This is what happens when you separate risk from reward.

Because the lender could sell these poorly underwritten loans to ignorant investors, there was no need to worry whether the loan had any chance of being repaid.

And because lenders were compensated based on the number and size of the loans that were funded, there was little incentive to stop this insanity.

[mark]

I know of a GARDENER who got a no money down mortgage for $550,000.This guy was somewhat illiterate,a drunk with dui convictions,previous deportation orders and was an undocumented alien.