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WaMu Employee Shunned for Refusing to Push Predatory Loans on Vulnerable Customers

A must-read article from suggests that a former Washington Mutual employee was shunned for refusing to push predatory loans on those most likely to default.

Former employee Greg Saffer has said conscience and common sense stopped him from pushing “option arm” home loans that would put homeowners at risk:

“I’m not going to steer people into a loan program that might not be good for them just because it’s more profitable for the company…”

However, it seems Washington Mutual, now owned by JPMorganChase, had only profits in mind, no matter the potential harm caused, according to testimony:

Stockton, Saffer testified, told him Option ARMs were the way to go “if you want to make some serious money….This is the loan that I want you to pitch.”

In his testimony in the case, Stockton denied ever talking to Saffer about which loan programs were most profitable and which weren’t.

Saffer also testified that Stockton instructed him not to give borrowers the full story on how Option ARMs worked, to emphasize the low minimum payments but not to mention that their loan balances would increase if they paid only the minimum option. And to make sure borrowers qualified for these loans, Saffer testified, Stockton encouraged him to help them overstate their incomes on their mortgage applications.

When he expressed qualms about the ethics of pushing Option ARMs, Saffer testified, Stockton told him: “Greg, we’re about profit and profit only.” Stockton told him to “get with the program” and start selling Option ARMs, or he might be out of a job, Saffer testified.

Saffer has said that he did not want to push these and other toxic loans on customers because he believed it was better business practice to help the customers out in the long term. This did not go along with WaMu policy:

Even as the subprime loan defaults were spiking and subprime lenders were going out of business in late 2007, WaMu was pushing its sales force to peddle subprime mortgages, Saffer claims in a written declaration in the arbitration proceedings. An in-house trainer instructed salespeople to target “lower income areas” with “less sophisticated” borrowers for deals that would strip the equity out of their homes, the declaration says.

“Do not feel sorry for these people,” the trainer said, according to Saffer’s declaration.

WaMu tried to pass itself off as a small, conservative bank from Washington and yet they were playing the same Wall Street game as other big lenders, preying on the economically unstable to drive up big profits. When Saffer refused to play along, his work situation became hostile to the point where he had to resign:

Along with defending WaMu’s Option ARMs, JP Morgan’s lawyers also take issue with Saffer’s assertion that working conditions had become so intolerable he had to resign.

Things weren’t so bad for him, they say, noting, for example, that “Saffer admits that no physical altercations ever took place between him and Stockton.”

Saffer replies that a lack of physical violence hardly qualifies a workplace as model employer.

Saffer is now his own boss. His company arranges “reverse mortgages” for elderly homeowners who want to tap their equity without putting their homes at risk.

He says he’s glad to be working at a job where he can follow his principles, not the dictates of Washington Mutual executives who were, in his view, intent on peddling unsafe products.

“I never would have thought this nice conservative bank from Washington State would have this boiler room, mill mentality,” Saffer says. “I never would have thought that in a million years.”

Stories of bankers doing the right thing are few and far between. Perhaps the most ethical of the lot just never make the news. Regardless, history will wag the finger of blame for the economic collapse at banks like Washington Mutual and men like Mark Stockton. Only then will guys like Greg Saffer be at peace.


One Comment on “WaMu Employee Shunned for Refusing to Push Predatory Loans on Vulnerable Customers”

  1. Some words from a bankruptcy attorney:

    In regards to Washington Mutual, the Bankruptcy judge in Washington Mutual’s case decided to vitiate an earlier decision that provided that some hedge funds may have engaged in insider trading.

    The court’s ruling is crucial on many fronts. For instance, after three long years of litigation, the decision could give the bankruptcy case a chance to wind up.

    Washington Mutual is waiting to see whether theJudge will approve its reorganization plan filed by their bankruptcy attorneys. WAMU entered bankruptcy in 2008.

    Thanks for mentioning the Washington Mutual bankruptcy in your blog. As a bankruptcy attorney, I’m well aware the importance of this story.

    Joseph S. Pearl, LL.M. – A Professional Law Corporation
    1400 Chester Ave., Suite C
    Bakersfield, CA 93301

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