Did WaMu Conspire to Inflate Home Appraisals?
Recent posts on Sweet Digs Seattle:
- Closed Sammamish Sales: Pine Lake, Beaver Lake
- Northeast Seattle Holds Its Own, Sort Of
- Spiffy Stop-Motion Video Explains Buying with Redfin
- Anatomy of a Rent or Buy Decision
Washington Mutual stock took a 16% nose dive to a 20 year low after New York Attorney General Andrew Cuomo said its home loans should not be sold to Fannie Mae and Freddie Mac. Cuomo has subpoenaed Fannie and Freddie whose stock values also hit the floor as a result. WaMu is alleged to have consipired to inflate home appraisals. If true this means homeowners may have overpaid for homes and are now paying artificially high mortgages.
Cuomo said he uncovered a “pattern of collusion” in appraisals on Washington Mutual loans. The attorney general is demanding Fannie Mae and Freddie Mac hand over details of loans they buy that may show appraisal values on homes were illegally inflated. Cuomo said he is targeting banks beyond Washington Mutual.
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Separately, Washington Mutual said home prices will continue to decline in 2008 and it must set aside more money for bad loans. New U.S. residential mortgages will probably total about $1.5 trillion in 2008, compared with industry forecasts of $2 trillion, the company said.
Cuomo isn’t the only one on the case, Hagens Berman Sobol Shapiro is also “investigating the filing of a class-action lawsuit in Seattle, headquarters of Washington Mutual, seeking proper appraisals, restitution for overpayment and damages for those affected if the allegations prove true.”
I addition to the housing market projections, I think WaMu would be wise to plan for home buyers shying away from their loan products after all the negative press the bank received this year.
So to augment our previous list of WaMu’s Woes:
I’ll add:
According to a Seattle PI article last year, “Washington Mutual has about 5,000 employees in the downtown core… 5,700 employees in Seattle, 7,700 in King County and 9,600 in Washington, totals that include branch personnel.” If they decide to implement a few percents worth of workforce reduction that means a hundred or more people looking for jobs in Seattle.
