The Residential Real Estate Crash Index Message Board

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Strategies & Market Trends : The Residential Real Estate Crash Index

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To: ChanceIs who wrote (117925)	4/22/2008 10:23:01 PM
From: Elroy Jetson	Read Replies (1) of 306849

I have a very good idea what went wrong with the Wachovia acquisition of Golden West Financial. You'll find it on page 34 of this SEC filing by Wachovia. secinfo.com A lot of the initial capital was Marion's inheritance so it's perhaps not surprising that much of the day to day business came under her personal supervision. Marion never trusted loan brokers and had obsessive control over any relationship like this. But Wachovia saw this as a way to quickly grow Golden West assets. Golden West Financial acquisition announced May 7, 2006 Offer full product set to GDW retail, wholesale channels Increase ARM sales through increased GDW broker penetration, WB channels Generally I agree with your comments. Obviously Wachovia bought at the top when buying Golden West and Herb (76) and Marion (77) never cared about the direction of interest rates. They're a lot like Warren Buffett. Their loan losses in the 1989-1996 downturn were insignificant. Golden West offered Adjustable Rate Mortgages set to Golden West's own index, their own cost of funds from depositors. This always assured a profit so long as foreclosure losses were small - and Marion was always quick to foreclose. Any loans which did not fit this criteria, such as fixed-rate loans, were quickly sold off, or they were a tiny percentage of exceptions which Marion knew about personally. Because they kept their own loans, Golden West was always able to offer features like "option pay" and "stated income" on their loans. But at Golden West, "stated income" always had to be very well documented with cash flows through the borrowers bank accounts. But Marion would never make loans with less than 20% equity. Marion would not have changed underwriting criteria. This very strict underwriting meant these odd looking loans did not go bad. But this time around, according to Wachovia, a lot of these loans went bad quickly. I'd be willing to bet that these loans came from Wachovia's new broker network - fraud loans. You can't make Marion's "option pay" and "stated income" loans without Marion's underwriting scrutiny. .

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