Washington Mutual

FDIC Sues WaMu Execs and Their Wives, by Kirsten Grind, Bizjournals.com

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The Federal Deposit Insurance Corp. filed suit against former executives of Washington Mutual, including former CEO Kerry Killinger, former President Steve Rotella, and their wives, in a case that seeks to recover unspecified damages at trial.

The suit, filed in the U.S. District Court in Western Washington, also seeks to freeze the estates of the Killingers and Rotellas. It also names David Schneider, the former head of WaMu‘s home loans division, who now works at JPMorgan Chase.

Earlier, the FDIC said it would seek $1 billion in damages, but the amount wasn’t specified in the suit.

In its 63-page complaint, the FDIC said that it’s suing the former, “highly-paid” WaMu executives to hold them responsible for losses in WaMu’s mortgage division. WaMu was closed by the federal Office of Thrift Supervision and its assets turned over to the FDIC in September 2008, marking the largest bank failure in U.S. history.

The complaint alleges that Killinger, Rotella and Schneider caused WaMu “to take extreme and historically unprecedented risks with WaMu’s held-for-investment home loans portfolio. They focused on short term gains to increase their own compensation, with reckless disregard for WaMu’s longer term safety and soundness.”

The executives and their attorneys could not immediately be reached for comment. In a statement, the FDIC said it files suits against former officers directors and other “professionals of failed institutions “when the case has merit and is expected to be cost effective.”

“This is done on behalf of creditors of the failed institution,” the FDIC said in its statement. “The FDIC investigates every failure to determine whether there is a solid basis for legal action and a sound source for recovery.”

The suit does not specify damages, although the FDIC previously said it would seek to recover up to $1 billion from all three former WaMu executives.

The suit also alleges that Killinger and his wife, Linda, sought to defraud WaMu’s creditors by transferring their multi-million dollar home in Palm Beach, Calif., into two personal trusts in August of 2008, a month before the bank failed. Linda Killinger was appointed trustee of those accounts. Killinger also transferred half of the couple’s property in the Highlands area of Seattle into a trust in Linda Killinger’s name.

Both these actions were “made with actual intent to hinder, delay or defraud Kerry Killinger’s present and future creditors,” the FDIC suit alleges. The government agency notes that Killinger faced numerous lawsuits at the time, and WaMu had lost more than $9 billion in a bank run.

Similarily, the suit alleges that Rotella and his wife, Esther, transferred their house in Orient, New York, into two residential trusts in the spring of 2008, and Rotella also transferred $1 million to Esther Rotella after WaMu failed, according to the complaint. “… the transfers were not disclosed to or were concealed from his present and future creditors,” the suit alleges.

KIRSTEN GRIND covers banking, finance and residential real estate for the Puget Sound Business Journal. She is currently on book leave.

 

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Robo-Signing Woman Kept Signing Docs- 13 Years After Her Death, by Housingdoom.com

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Who says that just because you’re dead you can’t keep on working? In what is certainly the most blatant case of robo-signing I’ve seen to date, one company had a woman signing hundreds of documents- for thirteen years after her death. [Hat tip Freedoms Phoenix.]

How, may you ask, can a woman who has been dead since 1995 sign documents more than a decade later? Normally, one would hazard to guess that stamps with her signature on them were still in use (this is more common than you would think in foreclosure land). That would be plenty troubling.

But this little account comes from the debt collection realm, a cesspool of bad practices. Here, the credit card company Providian (acquired by WaMu in 2005) had employees signing affidavits in the name of Martha Kunkle for over a decade. Debt collection agencies continued to use these bogus affidavits.
According to the Wall St. Journal:
Questions about Martha Kunkle first popped up in 2008 after her name appeared in thousands of affidavits generated by a unit of Providian National Corp. The credit-card issuer sold an undisclosed number of delinquent account balances to Portfolio Recovery Associates and other debt collectors, which then sued the borrowers to collect the debt…..

Concerns about Ms. Kunkle’s affidavits were raised in 2008 by lawyers for Jeanie Cole, one of thousands of Montana residents sued by Portfolio Recovery Associates to collect debts. After failing to locate Ms. Kunkle, lawyers for Ms. Cole interviewed her daughter, who worked at Providian in a document-processing division.

The daughter testified in a deposition that other Providian employees used the name Martha Kunkle when signing affidavits. Along with other employees, the daughter was responsible for signing affidavits. After countersuing Portfolio Recovery Associates for alleged violations of the Fair Debt Collection Practices Act, Ms. Cole was the lead plaintiff in a 2008 federal-court suit in Montana alleging the company targeted 16,000 borrowers using “false and misleading” affidavits.
These dodgy documents were for debt collections, not foreclosures. However, this does show how sloppy and overly automated the lending industry has become.
Some judges say robo-signing, in which affidavits are signed without fully reviewing underlying documentation, is more common in debt-collection cases than foreclosures. In July, the Federal Trade Commission recommended that state regulators require the disclosure of “more information” by debt collectors and buyers, concluding that they might be relying on erroneous or incomplete paperwork when suing to recover money.

“I’ve watched and wanted to tell defendants in these suits to demand proof of the underlying debt because that proof is so often flimsy,” said Jeffrey Lipman, a magistrate judge in Polk County, Iowa, which includes Des Moines, the state’s capital. Court rules give him little leeway to instruct borrowers in court.
Borrowers, beware.

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‘Liar Loans’ Earn Their Nickname, Michael Corkery, Wall Street Journal

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The failure of Hope for Homeowners to prevent foreclosures is sparking a blame game in Washington. The Department of Housing and Urban Development, which runs the voluntary program, says Congress made it too restrictive and expensive for homeowners.

Congressional leaders say the program’s failure — only 357 people have signed up since Oct. 1 — shows that lenders aren’t willing to modify loans voluntarily and they need to be forced to do so.

But HUD officials say other problems are hampering the program’s success. In order to refinance through Hope for Homeowners, applicants must certify they did not supply false or misleading information on a previous loan application. The HUD program also requires homeowners to supply two years of financial records.

HUD officials believe that people who used “stated income” mortgages which required no documentation of income, are having a hard time qualifying for Hope for Homeowners because of incorrect information on their previous loans. It might not all be the borrowers fault. In many cases, mortgage brokers and lenders fudged loan applications.

Either way, it appears that stated income mortgages, which are known as “liar loans,” are earning their nickname.

Here’s a list of the government sponsored and voluntary lender foreclosure prevention programs and how they are faring so far.

http://blogs.wsj.com/developments/2009/01/02/liar-loans-earn-their-nickname/