WAMU had a good system in place. Their performance with appraisals varied a bit depending on locale. Here in San Diego they had a good crew – right up until they laid all of them off back in 2006.
From there it went downhill in the space of just a few months. By the end of 2006 they were taking in trash appraisals without even a second glance.
The ex-WaMu appraiser probably got laid off at that time. WaMu replaced their staff by outsourcing the work to 2 budget appraisal management companies (AMCs) that were notorious for shoddy work. At first, WaMu tried to force these AMCs to contract with former WaMu appraisers and give them priority on those assignments – that only lasted a couple months because those appraisers wouldn’t work for the fees or the hassles that the AMCs wanted to run.
Then WaMu started ranking the AMC appraisers by how “cooperative” they were as far as signing off on deals. Those appraisers who had good cooperation scores were put on WaMu’s preferred list and were ekpt busy. Those that weren’t were put on the back burner and basically starved of work.
Enough complaints came in and enough examples of misconduct were provided during the Ny Attorney General’s investigation into predatory lending that he started investigating WaMu. He came across an email trail; a series of about 50 emails between WaMu and one of the AMCs.
In these emails, the one AMC (E-appraiseIT, based out of Poway) solicited WaMu for an increase in the percentage of WaMus business that they were handling. WaMus executives replied: “Sure, we might be able to do something about giving you more business but that would be dependent on you increasing your cooperation with us in getting more deals through”. The emails show E-appraiseIt execs debating whether to take the bait, and then eventually show that they did.
Supposedly the NY AG (Mario Cuomo) has just as much evidence against the other AMC (Lender Services Inc), as well as evidence against several other lenders. I say that so that nobody gets the idea that WaMu was especially bad in relation to the other lenders – most of them seem to have been doing it to one extent or another.
Simply put, when times were good many of the lenders did whatever they could to gut the various measures of due diligence in favor of automated processes that were a lot less expensive and a lot more superficial. Due diligence is an overhead for them, not a profit center.
