WaMu & MB

By Dave Fratello | April 15th, 2010
When you reach the point of begging solicitors to please, please stop, maybe something's gone haywire at the solicitors' end.

Such was the case at the MBC household, however many years ago. Among the many perpetual pitches for mortgage refinancing we received, Washington Mutual pitches were the most pervasive. And pernicious.

They wouldn't go away.

We wrote letters. We called contact numbers.

Turns out, that didn't get you off the list. Because heaven-knows-how-many "Washington Mutual" branded mortgage brokers were out there buying lists and farming our 'hood. Canceling off of one list didn't get you off the next up-and-comer's list.

We're imagining that lots of MB homes received the same sorts of notices. See our new poll on the front page.

The question is: Did you get pitched by WaMu? Did you take their deal?

WaMu is all over the news now because it's their turn to do the perp walk in Washington, D.C.

Consensus seems to be that the bank got very bad during the bubble, and that they focused too much on toxic "sub-prime" loans. If you could fog a mirror, you got a WaMu loan.

Sub-prime, though, wasn't the whole of WaMu's sketchy business. Not if they were all over MB.

The original narrative of the housing market/mortgage market/financial market implosion was that this was all about "sub-prime." But that story is so 2006-2007.  If WaMu's re-fi pitches were unavoidable in the MBC household, we're going to extrapolate a bit and assume they were everywhere.

And, of course, mailers are only a partial measure of how prevalent WaMu was in the local market.

WaMu's also on the radar here because the name's a constant, it seems, among homes for sale – particularly distress cases.

If you look at the loans, you see that WaMu either made big bubble-era purchase loans, or did a late-bubble re-fi. Now the sellers are getting out, and WaMu (now J.P Morgan Chase) is often in a difficult position.

One active listing (we'll spare the address) bears all the horrible hallmarks of the local bubble.

First, an overpriced speckie hitting the market near the peak. Next, a sale price nearly too high to be believed.

That purchase was with financing at 90% LTV from Countrywide, which back then was a treasured source of financing, and now is viewed as a prime suspect in the national mortgage meltdown.

At this overpriced speckie, a couple of years later, with national headlines screaming about the housing bubble bursting ("sub-prime" all over the news), WaMu comes in with a re-fi on the property at a much higher valuation. The sellers had now borrowed 107% of the original purchase price.

WaMu could make that loan. That's the power of "yes."

Fast-forward to now. The home's offered as a short sale, almost 25% below the value of the WaMu refi from just a few years ago. Chase is going to eat some part of the, er, dirt that WaMu left behind.

(Strange aside: WaMu held a "mock funeral" for competitor Countrywide at a retreat in 2006. As if WaMu were the better actor in this particular play.)

Bottom line: WaMu lent way too much on a multi-million-dollar home in Manhattan Beach because that's what they were incentivized to do. In this case, they piled on top of curious Countrywide loans. They weren't into evaluating the risks. If they made the loan, they got paid.

The national story is that WaMu was doing that sort of thing for "sub-prime" folks. But we locals may disagree. We had our share, too.

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