From the News Tribune: Reckless American home buyers and lax federal regulation deserve a healthy share of the responsibility for the international credit crisis. But there’s no calculating the blame that belongs to reckless mortgage lenders. The New York Times this week detailed the loan-mongering frenzy that brought down Seattle-based Washington Mutual in the biggest bank failure in history. It’s an appalling portrait of a once-responsible corporate culture gone rogue.
Under the leadership of CEO Kerry Killinger, WaMu morphed from a well-run company into a giant medicine show touting high-risk loans. Loan supervisor John Parsons was one of the barkers. Now in prison on drug-related theft charges, Parsons said he was doing meth daily while running a team that “screened” loan applications.
One such application came from a self-styled mariachi singer who claimed to be pulling in a six-figure income. That income could not be verified; Parsons finessed the problem by having the borrower photographed in mariachi costume in front of his house.
No one seems to have minded Parsons’ drug use. He got the job done.
That singer’s mortgage was what’s known as a “liar loan” – a loan extended with little or no attempt to determine whether the borrower can make the payments. Under Killinger’s leadership, WaMu couldn’t write enough of them. “If you were alive, they would give you a loan,” said an appraisal expert. “Actually, I think if you were dead, they would still give you a loan.” (source: News Tribune)
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