Chief
04-15-2008, 06:34 AM
http://seattletimes.nwsource.com/html/businesstechnology/2004349486_wamuappraise150.html
By Susan Kelleher
Seattle Times staff reporter
Washington Mutual's mortgage woes come as no surprise to Graham Albertini, a real-estate appraiser who worked at WaMu's Bellevue office when its mortgage business was going gangbusters.
Over eight years, Albertini said, he watched the bank trade safety for speed in its home-lending operations. The trade-off, he said, eroded fundamental safeguards put in place to protect WaMu from lending more against homes than they were worth.
When Albertini began working for WaMu in 1999, most mortgages were supported by a complete appraisal, which included an on-site property inspection, detailed measurements of the house and a physical drive-by of comparable homes by bank appraisers to determine if the house was worth what the buyer was willing to pay for it.
Every appraisal was given a cursory review, while pricier homes and houses with unusual features or circumstances were given an even closer review by a second certified appraiser. If everything checked out, the loan was sent to the bank's underwriting department for completion.
"Up until 2001, it was a pretty good system. Every appraisal was looked at by a human being," said Albertini, who now works for American Home Appraisals on Mercer Island.
But as loan volume increased, so did the pressures — and the incentives — for WaMu appraisers to work faster and bypass safeguards that could have protected the bank against the high-risk mortgages now dragging it down, Albertini and other appraisers say.
"It's the elimination of oversight in pursuit of profit. ... That's a formula for a breakdown," said appraiser Richard Hagar, who works with Albertini and regularly trains other colleagues and law-enforcement fraud investigators on appraisal standards.
WaMu did not respond to several requests for comment. It recently announced it would lay off up to 3,000 employees, cut shareholder dividends and shutter its free-standing home-loan operations. In the latest four quarters it has set aside about $6.4 billion to cover loan losses, and financial analysts say the bank could lose up to $16 billion more.
**SCHNIPP**
The continuing saga.
Consider that while WAMU is writing all of these bad loans, based upon appraisals that are inflated, let's keep in mind that the Clark County Assessor's Office (and many others) were out there backing those appraisals up with escalating property values that reaped ever increasing amounts of Property Taxes.
Lots of people here in Washington like to bitch about ever-increasing property taxes, but many of them were out borrowing money from WAMU via one of these so-called "NINJA" mortgages...(No Income, No Job or Assets).
What nobody is talking about is what the impact is going to be across the State to localities that rely on Property Taxes to pay for critical services. As Property values plummet, and foreclosures climb, tax revenues evaporate, so the money is going to have to come from some other place.
We are only beginning to see the impact of all of this in this area, and a year from now the housing markets could well be in full-blown crisis mode even in Washington and Oregon. If WAMU folds, and it very well could, unemployment in Washington and Oregon will spike too...
Still developing...
By Susan Kelleher
Seattle Times staff reporter
Washington Mutual's mortgage woes come as no surprise to Graham Albertini, a real-estate appraiser who worked at WaMu's Bellevue office when its mortgage business was going gangbusters.
Over eight years, Albertini said, he watched the bank trade safety for speed in its home-lending operations. The trade-off, he said, eroded fundamental safeguards put in place to protect WaMu from lending more against homes than they were worth.
When Albertini began working for WaMu in 1999, most mortgages were supported by a complete appraisal, which included an on-site property inspection, detailed measurements of the house and a physical drive-by of comparable homes by bank appraisers to determine if the house was worth what the buyer was willing to pay for it.
Every appraisal was given a cursory review, while pricier homes and houses with unusual features or circumstances were given an even closer review by a second certified appraiser. If everything checked out, the loan was sent to the bank's underwriting department for completion.
"Up until 2001, it was a pretty good system. Every appraisal was looked at by a human being," said Albertini, who now works for American Home Appraisals on Mercer Island.
But as loan volume increased, so did the pressures — and the incentives — for WaMu appraisers to work faster and bypass safeguards that could have protected the bank against the high-risk mortgages now dragging it down, Albertini and other appraisers say.
"It's the elimination of oversight in pursuit of profit. ... That's a formula for a breakdown," said appraiser Richard Hagar, who works with Albertini and regularly trains other colleagues and law-enforcement fraud investigators on appraisal standards.
WaMu did not respond to several requests for comment. It recently announced it would lay off up to 3,000 employees, cut shareholder dividends and shutter its free-standing home-loan operations. In the latest four quarters it has set aside about $6.4 billion to cover loan losses, and financial analysts say the bank could lose up to $16 billion more.
**SCHNIPP**
The continuing saga.
Consider that while WAMU is writing all of these bad loans, based upon appraisals that are inflated, let's keep in mind that the Clark County Assessor's Office (and many others) were out there backing those appraisals up with escalating property values that reaped ever increasing amounts of Property Taxes.
Lots of people here in Washington like to bitch about ever-increasing property taxes, but many of them were out borrowing money from WAMU via one of these so-called "NINJA" mortgages...(No Income, No Job or Assets).
What nobody is talking about is what the impact is going to be across the State to localities that rely on Property Taxes to pay for critical services. As Property values plummet, and foreclosures climb, tax revenues evaporate, so the money is going to have to come from some other place.
We are only beginning to see the impact of all of this in this area, and a year from now the housing markets could well be in full-blown crisis mode even in Washington and Oregon. If WAMU folds, and it very well could, unemployment in Washington and Oregon will spike too...
Still developing...