The New York Times has a long and detailed article about the lending practices of Washington Mutual and it’s very scary.
What do you do? Mariachi Singer? Well, we can’t verify your 6 figure income… let’s take your picture, that should work!
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.
Ok, fine – let’s say a photo was proof enough for a mortgage. The companies cannot deny predatory lending practices if management was aware of actives like this took place:
Top producers became heroes. Craig Clark, called the “king of the option ARM” by colleagues, closed loans totaling about $1 billion in 2005, according to four of his former coworkers, a tally he amassed in part by challenging anyone who doubted him.
“He was a bulldozer when it came to getting his stuff done,” said Lisa Alvarez, who worked in the Irvine office from 2003 to 2006.
Christine Crocker, who managed WaMu’s wholesale underwriting division in Irvine, recalled one mortgage to an elderly couple from a broker on Mr. Clark’s team.
With a fixed income of about $3,200 a month, the couple needed a fixed-rate loan. But their broker earned a commission of three percentage points by arranging an option ARM for them, and did so by listing their income as $7,000 a month. Soon, their payment jumped from roughly $1,000 a month to about $3,000, causing them to fall behind.
Really, I want to know why our money is going to these organizations unchecked.
I believe the bailout was required to prevent a total credit freeze IF it was implemented as planed. Unfortunately, it changed and no one – NO ONE – is providing any oversight of how the money is being spent. Companies will continue to act in unethical ways if they know the government will simply given them money when they need it.