Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: Tenchusatsu who wrote (420427)	9/27/2008 9:59:46 PM
From: bentway	Respond to of 1575737

WaMu loaned millions to O.C. home flippers with fraud history Troubled lender's mortgages helped family of real estate traders make millions as the market collapsed. By JOHN GITTELSOHN / The Orange County Register / Sept 19, 2008 . ocregister.com . In July 2007, Vijay and Supriti Soni of Corona del Mar paid $440,000 for a home at 2129 W. Civic Center Drive in Santa Ana. Five weeks later, they resold the house to Javier Hernandez – the family gardener and handyman – for $660,000. That's a 50 percent gain in 38 days – at a time when real estate prices in Santa Ana were plunging. But the lender that financed both mortgages – Washington Mutual Bank – took a bath. In March of this year Hernandez's loan went into default and in July the bank foreclosed. On the trustee's deed, the bank listed the home's value at $377,137 – $220,000 less than the outstanding loan. Records show that Washington Mutual, America's largest savings and loan and one of its most precariously perched lending institutions, financed at least 43 mortgages worth $24.5 million on properties bought and sold by members of the Soni family since early 2007. Of the 22 homes sold in that period, at least six have become problems for Washington Mutual: Four were foreclosed, one received a notice of default and another was listed for sale at a $260,000 loss. Total value of WaMu's mortgages on the troubled properties: $2.7 million. (Click here to see a graphic that explains how the family made money) Washington Mutual's lending practices resembled many other home loan institutions that have run into trouble, such as IndyMac Bank, which failed in July, and Countrywide Financial Corp., which was rescued in a January merger with Bank of America. They all offered complex adjustable-rate and subprime mortgages, approving many of the loans with limited scrutiny. When soaring numbers of borrowers were unable to repay or refinance their loans, the banks collapsed. A quality control problem WaMu's $310 billion in assets, its diverse loan portfolio, its large base of depositors and conservative risk management were supposed to protect the thrift from collapse. Now it appears to be the next domino in the row. WaMu said it is investigating the Soni family's transactions as part of a fraud scheme, and maintained that those loans are not a symptom of larger problems. "We have extensive controls in place to protect the integrity of our portfolio and loan processes," WaMu spokeswoman Sara Gaugl said. "We are continually enhancing our efforts to identify and prevent any potential illegal activity." But lending analysts said the Soni family's transactions raise troubling questions about standards at the Seattle-based thrift, which could face a federal takeover if it can not find a new source of credit. The distressed WaMu properties would then belong to the taxpayers. "This is a quality control problem," said Paul Leonard of the Center for Responsible Lending's California office. "It certainly is curious WaMu's fraud detection system didn't pick this up. It looks very bad and it is bad. The question is how widespread it is." No criminal background checks Leonard and others said the Sonis' transactions probably escaped notice because Washington Mutual, like many other lenders: * Allowed financing of property flips that occur less than 90 days after purchase. The Federal Housing Administration imposed a ban on financing 90-day flips in 2006. The FHA also requires a second appraisal for homes sold at a 100 percent gain less than 180 days after purchase. * Relied heavily on imperfect fraud detection software. Computers are good at flagging statistical aberrations – such as unrealistic income statements – but can be deceived by knowledgeable and determined insiders. * Did not check criminal backgrounds. The Sonis had been convicted in 2003 of numerous felonies for a real estate fraud scheme. WaMu checks criminal backgrounds of loan originators, such as outside mortgage brokers, but not borrowers. Last month, District Attorney investigators raided the family's homes and business offices. Now, prosecutors are investigating the Sonis and other members of their family for criminal behavior. "Unfortunately, we are back looking at these characters again," said Doug Brannan, the deputy Orange County District attorney who prosecuted the Sonis in 2003. Washington Mutual declined to answer specific questions about the Soni family case. <snip> (much more)

To: Tenchusatsu who wrote (420427)	9/28/2008 5:53:36 AM
From: Road Walker	2 Recommendations Read Replies (1) \| Respond to of 1575737

Bullcrap. Those "above your paygrade" were responsible for this mess. You want to put your blind trust in those same crooks? Give me a break. No choice... I don't think they are going to let you make the decisions. I'm pretty good at making lemonade out of lemons, finding opportunity in problems, but when it comes to weighing which "solution" is the least terrible my mind shuts down. Especially in this case, when we really don't know the extent of the bad paper or it's worth. There is no silver lining in this grey cloud.