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Citing privacy laws, banks refuse to explain why they repeatedly made loans that never had a chance of getting repaid.
But Graham Albertini, an appraiser for Washington Mutual from 1999 to 2006, provides an insider's take on the nation's largest bank before federal regulators seized it in September.
Albertini, who worked in WaMu's office in Belleview, Wash., has not heard of Sonny Kim. But what he describes helps explain how the bank came to approve $1-million in bad loans in deals involving properties Kim sold in Tampa.
What did you do in your job?
I reviewed appraisals that had been flagged. If I reviewed them and they complied with bank guidelines, (then) the appraisal was deemed acceptable for the loan.
Sounds simple enough. What went wrong?
When I first started, they had humans looking at these appraisals. In 2001, Washington Mutual automated this process. Computers would scan the appraisals, and the administrators were fired. But the computers weren't as thorough because they couldn't look at photos. They could only flag appraisal amounts that didn't fall within a range.
How many were you supposed to review?
Originally, it was two appraisals a day. It went up to four in 2004. They expected me to verify everything an appraiser did in a couple of hours. In 2006, they wanted me to do eight a day. I was getting appraisals for properties in New Mexico and Alaska, so it was impossible to have time to do field reviews. Most of the time, the appraisals were so bad, you couldn't believe it.
Did you feel pressure to approve bad appraisals?
Not directly, but they didn't pay you for the appraisals you rejected. So the people who did the best quality of work were getting paid the least, the people with the worst quality of work were getting paid the most. They had a poster in the office that said: Cheaper, better, faster. (WaMu) was rewarding us for production, not quality. You can see the result.
Lots of loans that were approved that never should have qualified?
It's not just that. It was the entire system. They used technology in a bad way: to process more and more applications faster and faster. The computers weren't flagging any appraisal that was less than $600,000. So there's probably millions of loans where the appraisals weren't looked at by anybody. The appraisers aren't stupid, they had figured this out. By that time, they could submit any type of appraisal and it would be accepted.
Why did you leave?
It was all about cutting costs and processing more loans. By 2006, they didn't need staff appraisers. They sent us an e-mail and we got a good severance package and were let go. They outsourced the appraising to management companies that use cheaper employees. The fees are really bad, so they get the worst appraisers.
This doesn't sound very promising.
It's scary. If other lenders were doing what WaMu was doing, this $700-billion (bailout) isn't anywhere near what we need to cover our losses.
[Last modified: Dec 22, 2008 04:19 PM]
Comments on this article
by Wilber
Dec 22, 2008 4:19 PM
And the govenment regulators were where? Where are the criminal charges?
by George
Dec 2, 2008 7:49 PM
Reviewers would talk of the day wamu would go under. Was proud of their concept when I first started and slowly but surely, they allowed machines to assign appraisals, not the reviewers and managers when I first started
by Jamie
Dec 2, 2008 5:50 PM
Graham was right, the magnitude of this abuse goes far beyond the $700B bailout. Attention Consumers: Kiss the days of easy mortgage loans good-bye!!!
by John
Dec 1, 2008 5:14 PM
Wamu failed miserably with their "due diligence". The problem is with management, not staff. Don't expect a different outcome in the future without a change in management. The rot is from the top!
by Fred
Dec 1, 2008 3:55 PM
So the reviewer would not be paid if they rejected an appraisal? Sounds like some enterprising prosecutor would easily make a case for Criminal Negligence, at least, if not something with more teeth under RICO.
by Steve
Dec 1, 2008 1:29 PM
the majority of licensed appraisers do not really understand Why they were licensed. They have no concept of Responsibility to the Public Good, nor Liability to the Stream of Commerce through which their reports flow. Staff or Fee, it is the same.
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