Washington Mutual, which is under pressure from the New York Attorney General's office over suspected fraudulent appraisal practices at a former vendor, is apparently making big changes to its secondary mortgage market business, and might pull the plug on the business altogether, according to market sources familiar with the situation.
At press time, it was unclear what changes were afoot for WaMu. A decision to scale back its mortgage securitization and trading activities could also lead to major dismissals in the ranks of its MBS professionals, said those sources. At press time, announcements of changes in WaMu's MBS business were expected on Monday.
"They are not going to be involved in the secondary market - [at least] for now. This affects every aspect of their business." The mortgage lender is expected, however, to continue originating mortgages.
"We do not comment on rumors," said Alan Gulick, a WaMu spokesman.
Over the last several weeks, WaMu has come under scrutiny for mortgage appraisal practices carried out by third-parties. In early November, the New York Attorney General Andrew Cuomo sued eAppraiseIT, and its parent company, First American Corp. The AG accused eAppraiseIT of caving to pressure from Washington Mutual to use appraisers that would inflate property values. Afterward, WaMu severed its relationship with eAppraiseIT and said it would conduct an investigation into the matter.
"The integrity of WaMu's appraisal process is very important and the company works hard to ensure that it operates properly," according to a WaMu statement issued after the New York AG's office announced its actions against eAppraiseIT. "The company takes any allegations of improper practices seriously, and is continuing its investigation into this matter."
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