Something is to be said for the permintation of bumbling practices. These are the same people turning away A paper, turning away people with Ficos in the 740's and refusing to consider credit cards rates for A paper under 22% to 28%: Its so nice not having to deal with these folks anymore. I know close to 37 families who have changed lending insituations for the above mentioned reason. Instead of working with their A paper Washington must have felt from the top down (never heard back from the brass upon my personnel correspondence pertaining to issues I just mentioned up top) that more money could be had treading the ethical boundries - wonder what the share holders think? Makes you wonder how competent the board is hiring leadership like they do and then compensating them for this type of activity.
Nov 7 - Washington Mutual Inc., the largest U.S. savings and loan, fell the most in 20 years after New York Attorney General Andrew Cuomo said he found a ``pattern of collusion'' on mortgage appraisals linked to the company. Cuomo subpoenaed Fannie Mae and Freddie Mac, the two biggest U.S. providers of home-loan financing, seeking information on mortgages they bought from Seattle-based Washington Mutual and investment banks that he declined to name.
``Fannie Mae and Freddie Mac must ensure that Washington Mutual's mortgages have not been corrupted by inflated appraisals,'' Cuomo said in a statement today. ``Our belief is the appraisal in many cases was fraudulent, that there was pressure on the appraisers.''
Cuomo last week sued the real-estate appraisal unit of First American Corp., the biggest U.S. title insurer, accusing it of inflating home values under pressure from Washington Mutual. Appraisals that don't accurately reflect a home's price could allow unscrupulous loan officers or brokers to close a deal that would otherwise be scotched, said Terry Wakefield, a mortgage industry consultant at the Wakefield Co. in Grafton, Wisconsin. Washington Mutual fell $4.19, or 17 percent, to $20.04 at 4 p.m. in composite trading on the New York Stock Exchange, the biggest decline since the stock market crashed on Oct. 19, 1987. Fannie Mae, based in Washington, dropped $5.60, or 10 percent, to $49.79. McLean, Virginia-based Freddie Mac slid $4.26, or 8.6 percent, to $45.13.
Market Value
Washington Mutual has lost more than $25 billion in market value this year, including about $3.7 billion today, as the stock plummeted 56 percent.
Mortgage brokers are typically paid when they close a loan, and the ``temptation to cheat is overwhelming'' when home prices fall, Wakefield said.
``The fact that Washington Mutual and every other lender allow this conflict to take place within their organization is something they need to take responsibility for,'' he said. ``If this turns up an indication of rampant inflated valuations, it's going to be a problem.''
Cuomo told Fannie Mae and Freddie Mac they should either stop buying Washington Mutual's loans or hire an independent examiner to value them. Both companies said they would hire an outside consultant.
Credit Swaps
The risk of Washington Mutual defaulting on its debt soared to the highest in at least five years, credit-default swap trading shows. The contracts, used to speculate on the ability to repay debt or hedge against losses, climbed 130 basis points to 385 basis points, according to broker Phoenix Partners Group in New York. They've more than quadrupled in the past month.
A basis point on a swap contract protecting $10 million in bonds from default for five years is equivalent to $1,000 a year.
``We take accusations such as these very seriously,'' said David Schneider, president of Washington Mutual's home-loan division, at a conference with investors today. His comments were made before Cuomo held a news conference in New York to announce the subpoenas.
Schneider said the firm's legal department and outside counsel are investigating the allegations. The relationship with First American's eAppraiseIT LLC unit began in July 2006, he said.
Fannie Mae and Freddie Mac said they will appoint an independent examiner to review appraisal practices cited in the complaint. Mortgages owned or guaranteed by the company that are based on inflated appraisals would have to be bought back by the lender under company policy, Fannie Mae said.
Loans Sold
Washington Mutual is the third-largest provider of loans to Freddie Mac, selling $24.7 billion in 2007, Cuomo said. It ranks 14th at Fannie Mae, with $7.8 billion of loans this year.
The Office of Thrift Supervision, Washington Mutual's regulator, said it wasn't contacted by Cuomo regarding the probe or the basis for his allegations.
Chief Executive Officer Kerry Killinger told investors at a company-sponsored conference today that housing prices will probably continue to decline in 2008, and Washington Mutual must set aside more money for bad loans as a result.
``The slowdown was more severe than either we or the industry anticipated,'' Killinger said. Home-price declines will erode earnings next year, he said.
New U.S. residential mortgages will probably total about $1.5 trillion in 2008, compared with industry forecasts of $2 trillion, according to the bank.
Expenses for the year may also be above the $8.5 billion high end of the range Washington Mutual forecast in its third- quarter conference call, Chief Financial Officer Thomas Casey said. The thrift plans to cut additional staff if needed, he said.
Money set aside to cover bad loans in the first quarter of 2008 should be about the same as the $1.3 billion Washington Mutual expects to reserve for that purpose this quarter, the company said.
Nov 7 - Washington Mutual Inc., the largest U.S. savings and loan, fell the most in 20 years after New York Attorney General Andrew Cuomo said he found a ``pattern of collusion'' on mortgage appraisals linked to the company. Cuomo subpoenaed Fannie Mae and Freddie Mac, the two biggest U.S. providers of home-loan financing, seeking information on mortgages they bought from Seattle-based Washington Mutual and investment banks that he declined to name.``Fannie Mae and Freddie Mac must ensure that Washington Mutual's mortgages have not been corrupted by inflated appraisals,'' Cuomo said in a statement today. ``Our belief is the appraisal in many cases was fraudulent, that there was pressure on the appraisers.''
Cuomo last week sued the real-estate appraisal unit of First American Corp., the biggest U.S. title insurer, accusing it of inflating home values under pressure from Washington Mutual. Appraisals that don't accurately reflect a home's price could allow unscrupulous loan officers or brokers to close a deal that would otherwise be scotched, said Terry Wakefield, a mortgage industry consultant at the Wakefield Co. in Grafton, Wisconsin. Washington Mutual fell $4.19, or 17 percent, to $20.04 at 4 p.m. in composite trading on the New York Stock Exchange, the biggest decline since the stock market crashed on Oct. 19, 1987. Fannie Mae, based in Washington, dropped $5.60, or 10 percent, to $49.79. McLean, Virginia-based Freddie Mac slid $4.26, or 8.6 percent, to $45.13.
Market Value
Washington Mutual has lost more than $25 billion in market value this year, including about $3.7 billion today, as the stock plummeted 56 percent.
Mortgage brokers are typically paid when they close a loan, and the ``temptation to cheat is overwhelming'' when home prices fall, Wakefield said.
``The fact that Washington Mutual and every other lender allow this conflict to take place within their organization is something they need to take responsibility for,'' he said. ``If this turns up an indication of rampant inflated valuations, it's going to be a problem.''
Cuomo told Fannie Mae and Freddie Mac they should either stop buying Washington Mutual's loans or hire an independent examiner to value them. Both companies said they would hire an outside consultant.
Credit Swaps
The risk of Washington Mutual defaulting on its debt soared to the highest in at least five years, credit-default swap trading shows. The contracts, used to speculate on the ability to repay debt or hedge against losses, climbed 130 basis points to 385 basis points, according to broker Phoenix Partners Group in New York. They've more than quadrupled in the past month.
A basis point on a swap contract protecting $10 million in bonds from default for five years is equivalent to $1,000 a year.
``We take accusations such as these very seriously,'' said David Schneider, president of Washington Mutual's home-loan division, at a conference with investors today. His comments were made before Cuomo held a news conference in New York to announce the subpoenas.
Schneider said the firm's legal department and outside counsel are investigating the allegations. The relationship with First American's eAppraiseIT LLC unit began in July 2006, he said.
Fannie Mae and Freddie Mac said they will appoint an independent examiner to review appraisal practices cited in the complaint. Mortgages owned or guaranteed by the company that are based on inflated appraisals would have to be bought back by the lender under company policy, Fannie Mae said.
Loans Sold
Washington Mutual is the third-largest provider of loans to Freddie Mac, selling $24.7 billion in 2007, Cuomo said. It ranks 14th at Fannie Mae, with $7.8 billion of loans this year.
The Office of Thrift Supervision, Washington Mutual's regulator, said it wasn't contacted by Cuomo regarding the probe or the basis for his allegations.
Chief Executive Officer Kerry Killinger told investors at a company-sponsored conference today that housing prices will probably continue to decline in 2008, and Washington Mutual must set aside more money for bad loans as a result.
``The slowdown was more severe than either we or the industry anticipated,'' Killinger said. Home-price declines will erode earnings next year, he said.
New U.S. residential mortgages will probably total about $1.5 trillion in 2008, compared with industry forecasts of $2 trillion, according to the bank.
Expenses for the year may also be above the $8.5 billion high end of the range Washington Mutual forecast in its third- quarter conference call, Chief Financial Officer Thomas Casey said. The thrift plans to cut additional staff if needed, he said.
Money set aside to cover bad loans in the first quarter of 2008 should be about the same as the $1.3 billion Washington Mutual expects to reserve for that purpose this quarter, the company said.
