WaMu faces another mortgage probe
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KAI RYSSDAL: Washington Mutual is this country’s biggest savings and loan. The loan part is where it’s gotten into trouble. Last week the company announced it would write down $1.6 billion in fourth-quarter subprime debt. It’s cutting more than 3,000 jobs. And it’s being investigated by the New York Attorney General, Andrew Cuomo. But wait, there’s more. The Securities and Exchange Commission is looking into how Washington Mutual handled mortgages based on inflated home appraisals. Jeremy Hobson has more.
JEREMY HOBSON: The Securities and Exchange Commission probe is just the beginning…says David Berenbaum of the National Community Reinvestment Coalition. He points to a recent study that found 90 percent of appraisers feel pressure from a mortgage broker or a lending institution to overvalue a home.
DAVID BERENBAUM: Appraisal inflation is the dirty little secret of the lending industry, and quite candidly, industry — whether it’s a mortgage broker or others — profit from those higher values.
Terry Dunkin, president of the Appraisal Institute, says that’s because with a higher appraisal the broker, the lender, and the real estate agent walk away from a home sale with fatter commissions and fees.
DUNKIN: But the one that’s left holding the bag is the property owner because they have a property that’s not worth what they thought it was worth.
Berenbaum says all this is just adding to the nation’s housing woes.
BERENBAUM: Yes the market has depreciated, but many people paid too much to begin with.
Washington Mutual wouldn’t comment. It did issue a statement denying any effort to inflate home appraisals.
In Washington, I’m Jeremy Hobson for Marketplace.
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