This is such a joke I can’t stand it. Washington Mutual is saying that lenders who broker to them, must adhere to tougher standards. According to this article, from CNN:
"brokers who do business with the company must show evidence that they explained to borrowers key terms of the loans they are recommending – such as the amount, whether the interest rate or the payments may change, and if the loan has a fee for prepayments."
This should happen automatically with all loans. I’m all for it. The current forms that are used, such as Good Faith Estimates and Truth in Lendings could definitely stand for some improvement. This is not the funny part…the following is:
"In addition, brokers should also disclose the amount of their compensation, Washington Mutual said, adding that it would try to call every borrower represented by a broker before closing to review the loan terms."
A bank, who does not disclose what they’re compensation is "on the back end" is insisting that mortgage brokers do…guess what, mortgage brokers all ready do disclose their YSP or SRP. Banks, like Washington Mutual do not! In addition, Washington Mutual is stating that they will try to call every borrower to review the loan terms. Yah, sure. I want a Washington Mutual representative to contact my clients. I doubt it would be to make sure they understand the terms. I’ll bet it’s to see if they can undercut the loan originator who was sending Washington Mutual the loan in the first place.
Washington Mutual is one of the grand-daddys of the mortgage time-bomb: the option ARM. They’ve been schlepping this product to their clients for years. And suddenly now they are going to try to improve standards of mortgage brokers when it’s banks like theirs that have created these programs and have been pushing them to Mortgage Brokers to pawn our clients for them?
From Business Week’s Nightmare Mortgages:
"There’s no way to camouflage what Harold, a former computer technician who asked BusinessWeek not to publish his last name, is about to face. He’s disabled and has one source of income: the $1,600 per month he receives in Social Security disability payments. In September, 2005, Harold refinanced out of a fixed-rate mortgage and into an option ARM for his $150,000 home in Chicago. The minimum monthly payment for the first year is $899, which he can afford. The interest-only payment is $1,329, which he can’t. The fully amortized payment is $1,454, which his lender, Washington Mutual (WM ), gets to count on its books. WaMu, no fly-by-night operation, said it couldn’t comment on Harold’s case, citing confidentiality issues."
Gee, wonder who’s going to counsel borrowers of loans originated by Washington Mutual?
In my seven years of working as a Mortgage Professional, I believe I’ve managed to send Washington Mutual two transactions. Both were at the customers request. The last one was years ago. I don’t need WaMu and I don’t embrace their new standards.
I just may have to pull my few bucks from my checking account with WaMu (the last time I called my friend of the family to reorder my checks, I was routed to a call-center in the Philippines) and try to find some Ma and Pa Bank to keep my spare change in.
I’m not laughing anymore.