Friday, December 27, 2013

“Washington Mutual Bank, F.A.” and “Washington Mutual Bank” Were Used For Different Purposes….Primarily Fraud.

For the past few years, people have been trying to make the argument (including myself) that “Washington Mutual Bank, F.A.” (WaMu, F.A.) changed its name to ”Washington Mutual Bank” (WMB) and ceased to exist after April 4, 2005. After all, this is what WMI disclosed in its 10-K filing for fiscal 2005 and testified to in its bankruptcy proceedings.

But when challenged with this argument in foreclosure proceedings throughout the U.S., JPMorgan Chase proffers the following document in an attempt to show that both these entities did in fact merge into one, but that WMB was allowed to use the name WaMu, F.A. as a d/b/a (“doing business as.”)

wamu fa ots snip 2

Though they may have “slipped a fast one” on their comatose regulators, these entities clearly served different purposes after the filing of this document. Having investigated cases involving WaMu, F.A. and WMB for several years now, I have accumulated a substantial amount of evidence to show that they were not acting as one in the same. For example, here is a recorded mortgage assignment in 2007 from WaMu, F.A. to WMB for the “consideration” amount of “$1.00.” Notice how both entities use the same address.
FA to WMB assignment - snip

This is prime facie evidence that these entities were acting separate from one another. In addition,  I have documents produced in discovery showing that the WaMu, F.A. entity was acting as (and calling itself) a “Premiere Mortgage Broker.”

Washington Mutual increased its origination of ”Combo Loans,” also referred to as  “80/20,” “80/10,” or “90/10″ loans, from April 4, 2005 thru 2007. The first number of the combo represents the 1st position lien and its percentage of the home’s value (i.e 80 means 80% of the “LTV” [loan-to-value].) The second number represents the simultaneous 2nd position lien and percentage of the home’s value (i.e. 80/10 means the 2nd loan equals 10% of the home’s value for a “collective loan-to-value” ["CLTV"] amount of 90%.)

For those of you who took out one of these simultaneous ”Combo Loans” with Washington Mutual during this time period, you will probably notice that the first position lien states WaMu, F.A. as the “Lender” whereas the 2nd position lien shows WMB as the “Lender.” Now if these entities were in fact the same, then why the use of different names on the documents when the loans closed simultaneously? The answer is simple. WaMu, F.A. was routinely selling the first position liens into the secondary market for purposes of securitization. But, if you read any of the “Pooling & Servicing Agreements” for WaMu trusts during this period, the “Seller” is almost always named as “Washington Mutual Bank” rather than “Washington Mutual Bank, F.A.” What this means is, like the assignment above, WaMu, F.A. had to first sell the loan to WMB before WMB could sell into the securitization chain. The chain of title would go from WaMu, F.A. to WMB (then questionably) to “Washington Mutual Mortgage Securities Corp.” ………..the Trust.

The use of WaMu, F.A. was a way to collect undisclosed “Yield Spread Premiums” by calling itself a “Federal Savings Bank” rather than a broker. WaMu, F.A. could then charge additional fees when selling the loans to its alter-ego, WMB. As part of the Washington Mutual securitization fraud scheme, it is also well known and documented that misrepresentations were made to investors regarding the loans that were sold. One of the most common misrepresentations I see when analyzing the internal loan level data is the “Loan-To-Value” percentages being represented to the investors on these “Combo Loans.” For example, on a “80/20″ combo loan, the data will show the loan was originated to reflect 80% of the property’s value (LTV = 80%) with the “collective loan-to-value” (CLTV) field also showing 80% rather than 100%. This is fraudulent as the investors were lead to believe that the home had 20% equity or that the borrower put down 20% if it was a purchase loan. This is the type of fraud upon the investors that results in a 13B settlement by JPMorgan Chase with the Department of Justice.
Thus, a word to the wise – Do not fall for the presumption that “Washington Mutual Bank, F.A.” and “Washington Mutual Bank” were the same entities after April 4, 2005. They served entirely different purposes for a reason…..primarily fraud. Just because the regulators didn’t catch this, or chose to ignore this, doesn’t mean it was legal.

“Washington Mutual Bank, F.A.” and “Washington Mutual Bank” Were Used For Different Purposes….Primarily Fraud.

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