Morgenson

new_york_times:http://www.nytimes.com/2008/11/02/business/02gret.html

By GRETCHEN MORGENSON
Published: November 1, 2008
AS a senior mortgage underwriter, Keysha Cooper was proud of her ability to spot fraud and other problems in a loan application. A decade of vetting mortgage documents had taught her plenty, she says.
But as a senior mortgage underwriter at Washington Mutual during the late, great mortgage boom, Ms. Cooper says she found herself in a vise. Brokers squeezed her from one side, her superiors from the other, she says, and both pressured her to approve loans, no matter what.
“At WaMu it wasn’t about the quality of the loans; it was about the numbers,” Ms. Cooper says. “They didn’t care if we were giving loans to people that didn’t qualify. Instead, it was how many loans did you guys close and fund?”
Ms. Cooper, 35, was laid off a year ago and is still unemployed. She came forward to discuss her experiences at the bank in order to help shareholders recover money from WaMu executives.
Ms. Cooper is one of 89 employees whose stories fill a voluminous complaint filed against officers of the company by the Ontario Teachers’ Pension Plan board, a big shareholder. Topping the list of defendants is Kerry K. Killinger, the WaMu chief executive who was ousted in mid-September.
WaMu was seized by federal regulators in late September, the biggest bank failure in the nation’s history. It was sold to JPMorgan Chase for $1.9 billion.
The shareholder complaint depicts WaMu’s mortgage lending operation as a boiler room where volume was paramount and questionable loans were pushed through because they were more profitable to the company.
When underwriters refused to approve dubious loans, they were punished, she says.
MS. COOPER started at WaMu in 2003 and lasted three and a half years. At first, she was allowed to do her job, she says. In February 2007, though, the pressure became intense. WaMu executives told employees they were not making enough loans and had to get their numbers up, she says.
“They started giving loan officers free trips if they closed so many loans, fly them to Hawaii for a month,” Ms. Cooper recalls. “One of my account reps went to Jamaica for a month because he closed $3.5 million in loans that month.”
Although Ms. Cooper couldn’t see it, the wheels were already coming off the subprime bus.
“If a loan came from a top loan officer, they didn’t care what the situation was, you had to make that loan work,” she says. “You were like a bad person if you declined a loan.”
One loan file was filled with so many discrepancies that she felt certain it involved mortgage fraud. She turned the loan down, she says, only to be scolded by her supervisor.
“She told me, ‘This broker has closed over $1 million with us and there is no reason you cannot make this loan work,’ ” Ms. Cooper says. “I explained to her the loan was not good at all, but she said I had to sign it.”
The argument did not end there, however. Ms. Cooper says her immediate boss complained to the team manager about the loan rejection and asked that Ms. Cooper be “written up,” with a formal letter of complaint placed in her personnel file.
Ms. Cooper said the team manager told her to “restructure” the loan to make it work. “I said, how can you restructure fraud? This is a fraudulent loan,” she recalls.
Ms. Cooper says that her bosses placed her on probation for 30 days for refusing to approve the loan and that her team manager signed off on the loan.
Four months later, the loan was in default, she says. The borrower had not made a single payment. “They tried to hang it on me,” Ms. Cooper said, “but I said, ‘No, I put in the system that I am not approving this loan.’ ”
Brokers often tried to bribe Ms. Cooper to approve loans, she says. One offered to pay $900 to send her son to football summer boot camp if she would approve a loan that had been declined by a host of other lenders. “I told him no and not to disrespect me like that again,” Ms. Cooper says.
Hidden fees meant brokers could easily make between $20,000 and $40,000 on a $500,000 loan, Ms. Cooper says.
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