The Times does a great job explaining why this was so. In part one of the series, it explains how the company intentionally told its risk officers to back off, and how the money machine overpowered those who dissented about the recklessness. And it fingers a bad guy, Craig Davis, who became head of lending and origination after an acquisition.
Overall, 34.1 percent of WaMu subprime loans went into foreclosure in those 10 markets — more than three times the 10.2 percent rate of archrival Countrywide.
In Cleveland, an astonishing 54 percent of its subprime unit’s loans have gone into foreclosure because of those deteriorated standards, which also produced this priceless anecdote:
“Someone in Florida had made a second-mortgage loan to O.J. Simpson, and I just about blew my top, because there was this huge judgment against him from his wife’s parents,” she recalled. Simpson had been acquitted of killing his wife Nicole and her friend but was later found liable for their deaths in a civil lawsuit; that judgment took precedence over other debts, such as if Simpson defaulted on his WaMu loan.
“When I asked how we could possibly foreclose on it, they said there was a letter in the file from O.J. Simpson saying ‘the judgment is no good, because I didn’t do it.’ “
It’s all here: the predatory lenders, the perversely incentivized brokers, the ineffective regulators, the greedy executives, the Fed’s easy-money policy, securitization, etc. And a super kicker:
Meanwhile, the FBI is investigating whether Washington Mutual executives broke criminal laws by deceiving shareholders about the bank’s health. As for now, there is no known federal investigation under way for deceiving borrowers.
Salute The Seattle Times for this one, which is as good as anything the big boys on the beat have produced. And it shows there’s still critically important stuff coming out of our wounded metro newspapers.
(hat-tip: my father-in-law)