For all of you who want to know how the mortgage industry really was between 2003 and 2007, this is a good testimonial. Remember, this was not WaMu specific. This was just how it was.
This is why I maintain that given such lax standards were used along with such high leverage in the way the loan programs were structured and guidelines were written (i.e. 50% debt-to-income ratios for Prime loans) that nothing is how it seems. There are many more loans are ‘at-risk’ than anyone can imagine going all the way up the credit chain to ‘Prime’.
This is why we have recently seen the ‘Subprime Implosion’ jump tracks to the Alt-A universe led by the now infamous Pay Option ARM, Jumbo Prime and Prime. This is why the mortgage bankers association just reported that 9% of all mortgage loans are currently delinquent. That goes far beyond Subprime.
This is why banks and regulators are all of a sudden endorsing mortgage modifications…they have to. There are $7 trillion in outstanding loans originated during the bubble years that are all suspect. The only way to fix this problem is to modify. If not and left up to a natural clearing process, the housing market could be in turmoil for a decade. If all the banks and servicers act together in a major loan mod plan re-qualifying every borrower with 28/36% debt ratios and putting them into a market-rate 30-year fixed, perhaps the housing market will bottom within a few years. -Best, Mr Mortgage
Nov 1, 2008 By Gretchen Morganson
AS a senior mortgage underwriter, Keysha Cooper was proud of her ability to spot fraud and other problems in a loan application. A decade of vetting mortgage documents had taught her plenty, she says.
But as a senior mortgage underwriter at Washington Mutual during the late, great mortgage boom, Ms. Cooper says she found herself in a vise. Brokers squeezed her from one side, her superiors from the other, she says, and both pressured her to approve loans, no matter what.
Click HERE for link to full story.
Highlights of story
At WaMu it wasn’t about the quality of the loans; it was about the numbers
They didn’t care if we were giving loans to people that didn’t qualify. Instead, it was how many loans did you guys close and fund?
The shareholder complaint depicts WaMu’s mortgage lending operation as a boiler room where volume was paramount and questionable loans were pushed through because they were more profitable to the company.
WaMu executives told employees they were not making enough loans and had to get their numbers up.
They started giving loan officers free trips if they closed so many loans, fly them to Hawaii for a month.
Although Ms. Cooper couldn’t see it, the wheels were already coming off the subprime bus.
If a loan came from a top loan officer, they didn’t care what the situation was, you had to make that loan work – you were like a bad person if you declined a loan.
One loan file was filled with so many discrepancies that she felt certain it involved mortgage fraud. She turned the loan down, she says, only to be scolded by her supervisor.
“She told me, ‘This broker has closed over $1 million with us and there is no reason you cannot make this loan work,’ ” Ms. Cooper says. “I explained to her the loan was not good at all, but she said I had to sign it.”
Brokers often tried to bribe Ms. Cooper to approve loans.
Hidden fees meant brokers could easily make between $20,000 and $40,000 on a $500,000 loan, Ms. Cooper says.
Ms. Cooper says that loans she turned down were often approved by her superiors.
Rejecting loan after loan, however, gave her battle fatigue. “The more you fight, the more you get in trouble,”
Ms. Cooper’s biggest regret, she says, is that she did not reject more loans.
“I swear 60 percent of the loans I approved I was made to,” she says. “If I could get everyone’s name, I would write them apology letters.”
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