The tragicomedy of WaMu's underwriting lowpoint

There’s a detail in the Seattle Times’ exhaustive series on Washington Mutual’s mortgage lending practices that’s too darkly funny to go unnoticed. The four stories focus on the Seattle thrift’s journey down the dark path of low-documentation lending and risky products, such as adjustable-rate mortgages. At one point, WaMu even made a low-doc loan to O.J. Simpson. Yes, that O.J. Simpson.

In the middle of Part One of the series, Fay Chapman, WaMu’s chief legal officer from 1997 to 2007, is describing the deterioration of the lender’s underwriting standards, a trend she says she was powerless to prevent. Chapman offered this example:

"’Someone in Florida had made a second-mortgage loan to O.J. Simpson, and I just about blew my top, because there was this huge judgment against him from his wife's parents,’ “ she recalled. Simpson had been acquitted of killing his wife Nicole and her friend but was later found liable for their deaths in a civil lawsuit; that judgment took precedence over other debts, such as if Simpson defaulted on his WaMu loan.

“When I asked how we could possibly foreclose on it, they said there was a letter in the file from O.J. Simpson saying ‘the judgment is no good, because I didn't do it.’ ”