www.nytimes.com/2008/12/28/business/28wamu.html?_r=2
Enlarge This Image Sandy Huffaker for The New York Times "It was just disheartening," said Sherri Zaback, a mortgage screener for Washington Mutual. The Reckoning Mortgage Factory Articles in this series have explored the causes of the financial crisis.
Washington Mutual, 2003 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'. 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. "I'd lie if I said every piece of documentation was properly signed and dated," said Mr Parsons, speaking through wire-reinforced glass at a California prison near here, where he is serving 16 months for theft after his fourth arrest -- all involving drugs. While Mr Parsons, whose incarceration is not related to his work for WaMu, oversaw a team screening mortgage applications, he was snorting methamphetamine daily, he said. "In our world, it was tolerated," said Sherri Zaback, who worked for Mr Parsons and recalls seeing drug paraphernalia on his desk. On a financial landscape littered with wreckage, WaMu, a Seattle-based bank that opened branches at a clip worthy of a fast-food chain, stands out as a singularly brazen case of lax lending. Interviews with two dozen former employees, mortgage brokers, real estate agents and appraisers reveal the relentless pressure to churn out loans that produced such results. While that sample may not fully represent a bank with tens of thousands of people, it does reflect the views of employees in WaMu mortgage operations in California, Florida, Illinois and Texas. Their accounts are consistent with those of 89 other former employees who are confidential witnesses in a class action filed against WaMu in federal court in Seattle by former shareholders. According to these accounts, pressure to keep lending emanated from the top, where executives profited from the swift expansion -- not least, Kerry K Killinger, who was WaMu's chief executive from 1990 until he was forced out in September. Between 2001 and 2007, Mr Killinger received compensation of $88 million, according to the Corporate Library, a research firm. He declined to respond to a list of questions, and his spokesman said he was unavailable for an interview. During Mr Killinger's tenure, WaMu pressed sales agents to pump out loans while disregarding borrowers' incomes and assets, according to former employees. The bank set up what insiders described as a system of dubious legality that enabled real estate agents to collect fees of more than $10,000 for bringing in borrowers, sometimes making the agents more beholden to WaMu than they were to their clients. WaMu gave mortgage brokers handsome commissions for selling the riskiest loans, which carried higher fees, bolstering profits and ultimately the compensation of the bank's executives. WaMu pressured appraisers to provide inflated property values that made loans appear less risky, enabling Wall Street to bundle them more easily for sale to investors. "It was the Wild West," said Steven M Knobel, a founder of an appraisal company, Mitchell, Maxwell & Jackson, that did business with WaMu until 2007. Actually, I think if you were dead, they would still give you a loan."
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