Was There A Loan It Didn't Like?
By GRETCHEN MORGENSON
2 November 2008
The New York Times
Late Edition - Final
Copyright 2008 The New York Times Company. All Rights Reserved.
AS a senior mortgage underwriter, Keysha Cooper was proud of her ability
to spot fraud and other problems in a loan application. A decade of
vetting mortgage documents had taught her plenty, she says.
But as a senior mortgage underwriter at Washington Mutual during the late,
great mortgage boom, Ms. Cooper says she found herself in a vise. Brokers
squeezed her from one side, her superiors from the other, she says, and
both pressured her to approve loans, no matter what.
''At WaMu it wasn't about the quality of the loans; it was about the
numbers,'' Ms. Cooper says. ''They didn't care if we were giving loans to
people that didn't qualify. Instead, it was how many loans did you guys
close and fund?''
Ms. Cooper, 35, was laid off a year ago and is still unemployed. She came
forward to discuss her experiences at the bank in order to help
shareholders recover money from WaMu executives.
Ms. Cooper is one of 89 employees whose stories fill a voluminous
complaint filed against officers of the company by the Ontario Teachers'
Pension Plan board, a big shareholder. Topping the list of defendants is
Kerry K. Killinger, the WaMu chief executive who was ousted in
mid-September.
WaMu was seized by federal regulators in late September, the biggest bank
failure in the nation's history. It was sold to JPMorgan Chase for $1.9
billion.
The shareholder complaint depicts WaMu's mortgage lending operation as a
boiler room where volume was paramount and questionable loans were pushed
through because they were more profitable to the company.
When underwriters refused to approve dubious loans, they were punished,
she says.
MS. COOPER started at WaMu in 2003 and lasted three and a half years. At
first, she was allowed to do her job, she says. In February 2007, though,
the pressure became intense. WaMu executives told employees they were not
making enough loans and had to get their numbers up, she says.
''They started giving loan officers free trips if they closed so many
loans, fly them to Hawaii for a month,'' Ms. Cooper recalls. ''One of my
account reps went to Jamaica for a month because he closed $3.5 million in
loans that month.''
Although Ms. Cooper couldn't see it, the wheels were already coming off
the subprime bus.
''If a loan came from a top loan officer, they didn't care what the
situation was, you had to make that loan work,'' she says. ''You were like
a bad person if you declined a loan.''
One loan file was filled with so many discrepancies that she felt certain
it involved mortgage fraud. She turned the loan down, she says, only to be
scolded by her supervisor.
''She told me, 'This broker has closed over $1 million with us and there
is no reason you cannot make this loan work,' '' Ms. Cooper says. ''I
explained to her the loan was not good at all, but she said I had to sign
it.''
The argument did not end there, however. Ms. Cooper says her immediate
boss complained to the team manager about the loan rejection and asked
that Ms. Cooper be ''written up,'' with a formal letter of complaint
placed in her personnel file.
Ms. Cooper said the team manager told her to ''restructure'' the loan to
make it work. ''I said, how can you restructure fraud? This is a
fraudulent loan,'' she recalls.
Ms. Cooper says that her bosses placed her on probation for 30 days for
refusing to approve the loan and that her team manager signed off on the
loan.
Four months later, the loan was in default, she says. The borrower had not
made a single payment. ''They tried to hang it on me,'' Ms. Cooper said,
''but I said, 'No, I put in the system that I am not approving this loan.'
''
Brokers often tried to bribe Ms. Cooper to approve loans, she says. One
offered to pay $900 to send her son to football summer boot camp if she
would approve a loan that had been declined by a host of other lenders.
''I told him no and not to disrespect me like that again,'' Ms. Cooper
says.
Hidden fees meant brokers could easily make between $20,000 and $40,000 on
a $500,000 loan, Ms. Cooper says.
''WaMu was allowing brokers to get 6 to 8 percent off one loan,'' she
says. ''If I had a loan where the borrower was already tight and then I
saw the broker is getting $10,000 or $20,000, I would cut their fees back.
They would get so upset with me.''
Ms. Cooper says that loans she turned down were often approved by her
superiors. One in particular came back to haunt WaMu.
Vetting a loan one day, Ms. Cooper says she became suspicious when a
photograph of the house being bought showed one street address while
documents deeper in the file showed a different address. She contacted the
appraiser, and recalls that he said that he must have erred and that he
would send her the correct documents.
''So then he sent me an appraisal with a picture of the same house but
this time with the right number on it,'' Ms. Cooper recalls. ''I looked
the address up in our system and could not find it. I called the appraiser
and said, 'Please investigate.' ''
The appraiser came back, reporting that a visit to the California property
had found everything in order and in agreement with the original
appraisal. ''I was so for sure that it was fraud I wanted to get on an
airplane,'' Ms. Cooper says.
The $800,000 loan was approved, but not by Ms. Cooper. Six months later,
it defaulted, she says. ''When they went to foreclose on the house, they
found it was an empty lot,'' she recalls. ''I remember clear as day this
manager comes over to me and asks, 'Do you remember this loan?' I knew
just what she was talking about.''
Rejecting loan after loan, however, gave her battle fatigue. ''The more
you fight, the more you get in trouble,'' she says. She was written up
three or four times at WaMu.
After WaMu's mortgage lending unit laid her off, she applied for work in
its retail banking division. She was turned down, she suspects, because of
the critical letters in her personnel file.
Ms. Cooper's biggest regret, she says, is that she did not reject more
loans. ''I swear 60 percent of the loans I approved I was made to,'' she
says. ''If I could get everyone's name, I would write them apology
letters.''
CHAD JOHNSON, a partner at Bernstein, Litowitz Berger & Grossmann, is lead
counsel for shareholders in the suit. He said: ''Killinger pocketed tens
of millions of dollars from WaMu, while investors were left with worthless
stock.'' With WaMu gone, he added, ''it is all the more important that
Killinger and his co-defendants are held accountable.''
The lawyer representing WaMu and Mr. Killinger did not return a phone call
seeking comment.
Ms. Cooper hopes to return to the mortgage business soon. ''I loved
underwriting because it's about being able to put a person in their dream
home,'' she says. ''But messing these borrowers around was wrong.''
By GRETCHEN MORGENSON
2 November 2008
The New York Times
Late Edition - Final
Copyright 2008 The New York Times Company. All Rights Reserved.
AS a senior mortgage underwriter, Keysha Cooper was proud of her ability
to spot fraud and other problems in a loan application. A decade of
vetting mortgage documents had taught her plenty, she says.
But as a senior mortgage underwriter at Washington Mutual during the late,
great mortgage boom, Ms. Cooper says she found herself in a vise. Brokers
squeezed her from one side, her superiors from the other, she says, and
both pressured her to approve loans, no matter what.
''At WaMu it wasn't about the quality of the loans; it was about the
numbers,'' Ms. Cooper says. ''They didn't care if we were giving loans to
people that didn't qualify. Instead, it was how many loans did you guys
close and fund?''
Ms. Cooper, 35, was laid off a year ago and is still unemployed. She came
forward to discuss her experiences at the bank in order to help
shareholders recover money from WaMu executives.
Ms. Cooper is one of 89 employees whose stories fill a voluminous
complaint filed against officers of the company by the Ontario Teachers'
Pension Plan board, a big shareholder. Topping the list of defendants is
Kerry K. Killinger, the WaMu chief executive who was ousted in
mid-September.
WaMu was seized by federal regulators in late September, the biggest bank
failure in the nation's history. It was sold to JPMorgan Chase for $1.9
billion.
The shareholder complaint depicts WaMu's mortgage lending operation as a
boiler room where volume was paramount and questionable loans were pushed
through because they were more profitable to the company.
When underwriters refused to approve dubious loans, they were punished,
she says.
MS. COOPER started at WaMu in 2003 and lasted three and a half years. At
first, she was allowed to do her job, she says. In February 2007, though,
the pressure became intense. WaMu executives told employees they were not
making enough loans and had to get their numbers up, she says.
''They started giving loan officers free trips if they closed so many
loans, fly them to Hawaii for a month,'' Ms. Cooper recalls. ''One of my
account reps went to Jamaica for a month because he closed $3.5 million in
loans that month.''
Although Ms. Cooper couldn't see it, the wheels were already coming off
the subprime bus.
''If a loan came from a top loan officer, they didn't care what the
situation was, you had to make that loan work,'' she says. ''You were like
a bad person if you declined a loan.''
One loan file was filled with so many discrepancies that she felt certain
it involved mortgage fraud. She turned the loan down, she says, only to be
scolded by her supervisor.
''She told me, 'This broker has closed over $1 million with us and there
is no reason you cannot make this loan work,' '' Ms. Cooper says. ''I
explained to her the loan was not good at all, but she said I had to sign
it.''
The argument did not end there, however. Ms. Cooper says her immediate
boss complained to the team manager about the loan rejection and asked
that Ms. Cooper be ''written up,'' with a formal letter of complaint
placed in her personnel file.
Ms. Cooper said the team manager told her to ''restructure'' the loan to
make it work. ''I said, how can you restructure fraud? This is a
fraudulent loan,'' she recalls.
Ms. Cooper says that her bosses placed her on probation for 30 days for
refusing to approve the loan and that her team manager signed off on the
loan.
Four months later, the loan was in default, she says. The borrower had not
made a single payment. ''They tried to hang it on me,'' Ms. Cooper said,
''but I said, 'No, I put in the system that I am not approving this loan.'
''
Brokers often tried to bribe Ms. Cooper to approve loans, she says. One
offered to pay $900 to send her son to football summer boot camp if she
would approve a loan that had been declined by a host of other lenders.
''I told him no and not to disrespect me like that again,'' Ms. Cooper
says.
Hidden fees meant brokers could easily make between $20,000 and $40,000 on
a $500,000 loan, Ms. Cooper says.
''WaMu was allowing brokers to get 6 to 8 percent off one loan,'' she
says. ''If I had a loan where the borrower was already tight and then I
saw the broker is getting $10,000 or $20,000, I would cut their fees back.
They would get so upset with me.''
Ms. Cooper says that loans she turned down were often approved by her
superiors. One in particular came back to haunt WaMu.
Vetting a loan one day, Ms. Cooper says she became suspicious when a
photograph of the house being bought showed one street address while
documents deeper in the file showed a different address. She contacted the
appraiser, and recalls that he said that he must have erred and that he
would send her the correct documents.
''So then he sent me an appraisal with a picture of the same house but
this time with the right number on it,'' Ms. Cooper recalls. ''I looked
the address up in our system and could not find it. I called the appraiser
and said, 'Please investigate.' ''
The appraiser came back, reporting that a visit to the California property
had found everything in order and in agreement with the original
appraisal. ''I was so for sure that it was fraud I wanted to get on an
airplane,'' Ms. Cooper says.
The $800,000 loan was approved, but not by Ms. Cooper. Six months later,
it defaulted, she says. ''When they went to foreclose on the house, they
found it was an empty lot,'' she recalls. ''I remember clear as day this
manager comes over to me and asks, 'Do you remember this loan?' I knew
just what she was talking about.''
Rejecting loan after loan, however, gave her battle fatigue. ''The more
you fight, the more you get in trouble,'' she says. She was written up
three or four times at WaMu.
After WaMu's mortgage lending unit laid her off, she applied for work in
its retail banking division. She was turned down, she suspects, because of
the critical letters in her personnel file.
Ms. Cooper's biggest regret, she says, is that she did not reject more
loans. ''I swear 60 percent of the loans I approved I was made to,'' she
says. ''If I could get everyone's name, I would write them apology
letters.''
CHAD JOHNSON, a partner at Bernstein, Litowitz Berger & Grossmann, is lead
counsel for shareholders in the suit. He said: ''Killinger pocketed tens
of millions of dollars from WaMu, while investors were left with worthless
stock.'' With WaMu gone, he added, ''it is all the more important that
Killinger and his co-defendants are held accountable.''
The lawyer representing WaMu and Mr. Killinger did not return a phone call
seeking comment.
Ms. Cooper hopes to return to the mortgage business soon. ''I loved
underwriting because it's about being able to put a person in their dream
home,'' she says. ''But messing these borrowers around was wrong.''