Probe: Fraudulent Mortgages Brought Down WaMu
STEVE INSKEEP, Host:
Jim, good morning.
JIM ZARROLI: Good morning, Steve.
INSKEEP: How did Washington Mutual's system work?
ZARROLI: So it became huge business for WaMu. The bank sold $77 billion worth of subprime loans between 2000 and 2007.
INSKEEP: Well, what made them any worse than all the other people who were trading in bad mortgage assets?
ZARROLI: There was an audit done in 2005. It looked at two of the top loan officers, and it said that 83 percent of the loans coming from one of them were fraudulent. And yet even after this was pointed out, the loan officer was allowed to keep working at WaMu for three years.
INSKEEP: Is the suggestion there that the top executives knew that this was going terribly wrong and did nothing about it?
ZARROLI: In 2005, there was an audit that warned about an extensive level of loan fraud in the Southern California offices. And this was significant because it wasn't just the mortgage applicants that were hurt by that. WaMu was taking these mortgages and repackaging them as securities, and selling them to investors. And so there was a lot of fraud. It's the investors who were deceived.
INSKEEP: Well, I want to just ask very quickly. We've just got a few seconds. Sorry to interrupt, Jim. But because this bank was packaging these mortgages and selling them, dumping them on somebody else, how did it catch up with them? How did they go bankrupt?
ZARROLI: Well, I think eventually, the market turned. Prices started to fall. The securities were worth less. And everything came crashing down around them. But we're going to hear more about that. We're going to hear from the former president, the former chief executive today. And they'll be asked about that.
INSKEEP: And we'll be listening for your reporting on that. Jim, thanks very much.
ZARROLI: You're welcome.
INSKEEP: You're listening to MORNING EDITION from NPR News.
NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.