by Calculated Risk on 10/25/2009 08:33:00 AM

From Drew DeSilver at the Seattle Times: Reckless strategies doomed WaMu

This is the first of two parts. Here is a section on loose lending:

"The big saying was 'A skinny file is a good file,' " said Nancy Erken, a WaMu loan consultant in Seattle. She recalled helping credit-challenged borrowers collect canceled checks, explanatory letters and other documentation that they could afford their loans.

"I'd take the files over to the processing center in Bellevue and they'd tell me 'Nancy, why do you have all this stuff in here? We're just going to take this stuff and throw it out,' " she said.

In time, WaMu even began allowing low- or no-documentation option ARMs, piling risk on risk. The loose standards spread through the company like a flu virus.

And on risk management:

In an internal newsletter dated Oct. 31, 2005, and obtained by The Seattle Times, risk managers were told they needed to "shift (their) ways of thinking" away from acting as a "regulatory burden" on the company's lending operations and toward being a "customer service" that supported WaMu's five-year growth plan.

Risk managers were to rely less on examining borrowers' documentation individually and more on automated processes, Melissa Martinez, WaMu's chief compliance and risk oversight officer, wrote in the memo.
...
"The whole tone it set was that 'Maybe the next file I review I should pull back, hold off on downgrading (a loan), not take a sharp pencil to what production was doing,' " [Dale George, a former senior credit-risk officer in Irvine, Calif.] said.

"They weren't going to have risk management get in the way of what they wanted to do, which was basically lend the customers more money."

Ouch. There is much more in the article - on Option ARMs, switching to originate-to-sell and more ... WaMu was definitely "doomed".