The Securities and Exchange Commission is investigating how Washington Mutual Inc. handled and reported on mortgages that may have been based on inflated home appraisals.
The inquiry is in its infancy and involves several issues, including whether Wamu accurately disclosed to investors in mortgage-backed securities how its loans were appraised and whether it properly accounted for its loans in financial disclosures to Wamu investors, according to people familiar with the situation.
Wamu said: "We are voluntarily and fully cooperating with the SEC's inquiry as well as" the Office of Thrift Supervision "and look forward to bringing the facts to both the regulators and public."
The Wamu inquiry comes on the heels of a lawsuit filed in November by New York Attorney General Andrew Cuomo that did not name the Seattle thrift company as a defendant but alleged it exerted pressure on an appraisal company to inflate valuations to ensure its loans went through.
Wamu said, "After spending a month and a half investigating these allegations, we can say with confidence that there has been no systematic effort by Wamu to inflate home appraisals."
Last month Freddie Mac and Fannie Mae agreed to appoint independent examiners to look at whether they have done enough to protect investors from the risks of inflated appraisals, particularly on Wamu loans.
The suit filed by Mr. Cuomo alleged that First American Corp.'s appraisal unit compromised the independence of appraisers it hired.
The suit also claimed that Wamu hand-picked appraisers who brought in high valuations and said Wamu employees pressured the appraisal unit to increase estimates that came in too low. First American denied the allegations.
