WaMu’s Top Gun Loan Officers Targeted Low-Income Minorities to Rob the Bank and the Nation

Remember when working in a bank’s lending department meant saying “NO” to people fairly often in order to protect the bank from losses that could lead to the bank being in financial jeopardy?  People that have spent their careers working at banks in their underwriting departments certainly do.

And that’s what precisely what made many bank employees so shocked when, during our last housing boom, they were told that their job had changed.  Now they were never to say “NO”.

One such bank employee, who worked for Washington Mutual’s Loan Fulfillment Center in Downey, California, says she hated her years working at the bank and was thrilled when she finally found another job and “got the hell out of there”.  While there, she worked in positions that ranged from underwriting to middle management.

She contacted me the other day, and spoke with me for over an hour under the condition that she would remain anonymous.  Apparently, the people she worked for are still in the mortgage industry and she’s understandably scared that they would seek retribution if they knew she had “talked” to anyone in the media.  So, we’ll go ahead and call her Margaret because it’s not her name.

WaMu’s Loan Fulfillment Center was run by Michael Provencio, whose title was Vice President of Operations.  Margaret describes him as a boss that had no idea what was going on, and didn’t want to know.  “Mike never looked at files.  He’d show up and then leave.  He was hardly ever there.  Mike wouldn’t know how to underwrite a file if life depended on it,” Margaret explained.

Paul Campbell, a WaMu Sales Vice President, was ultimately responsible for the office, but worked in a different location and showed up in the Downey office maybe once a month, according to Margaret. The office’s number two was sales manager, Ramon Delacruz.

The Underwriting Manager was Ed Bernal, and Margaret describes Ed as the guy who the underwriters all knew would sign off on literally anything.  “If an underwriter wasn’t comfortable putting their own signature on something, someone would say, “take it to Ed, and Ed would sign it.”

Margaret explained that WaMu’s Loan Processing Center was a place where loans only got funded, almost never declined.  “They were funding loans without all funding conditions being met, such as needing pay stubs or W2s in the package, or waiting on a copy of the most recent bank statement.  We’d fund the loan anyway, and would put a slip with “Joe owes me a W2” written on it.  But once the loan funded… oh well,” Margaret said.

The story then went from a bank not following rules, to something far more insidious… something immoral and certainly illegal.

Margaret introduced me to the man behind the Downey Loan Center’s “success,” a man by the name of Tom Ramirez, the top gun loan officer that was really running the office, if not in name, then certainly as a practical matter.  Ramirez, along with his “partner,” Mario Loria, were the undisputed kings of the Downey loan processing office.  They and their team were responsible for at least 2,000 loans during Margaret’s tenure at WaMu, which by my calculations would have been something in the neighborhood of half a billion dollars, give or take.

Tom and Mario’s team worked in what was called “Emerging Markets,” meaning that their market was a Community Reinvestment Act type of area… lower income… minorities… loans considered “non-traditional,” with features like being able to just state your income, as oppose to having to establish it by presenting pay check stubs, bank statements and tax returns, as had traditionally been the case when applying for a mortgage loan.  Tom’s market had borrowers that Margaret had never heard of before… people that worked as gardeners, but supposedly earned $75,000 a year or more, for example.  Many didn’t speak English.  Few had much education beyond high school, and not all had even that.

Tom and Mario targeted this type of market because they could do whatever was best for them, and the borrowers would never even know.

The people in these communities are hard working people.  Many are first generation immigrants to this country to whom English is the second language they never mastered.  They’re people trying to raise a family under difficult circumstances.  They sacrifice everything so that they’re children will get an education and one day have a better life than they themselves ever hoped for or had.  In most of these families, money is always tight, but love is always free flowing.

These families were hardly a match for the sophisticated operation at Washington Mutual, run by Tom and Mario.  These were people that didn’t always trust others easily, but they trusted the bank.  I think most of us thought we could trust the bank, for the most part anyway.  I mean, a bank wasn’t a used car lot, right?

But as it turned out, it was much worse than any used car lot ever thought about being.  WaMu’s Loan Processing Center in Downey was a place that could make your dreams come true for a little while and then look the other way as you lost everything and your life was torn apart.  Because WaMu’s Tom and Mario could hand you the keys to the American Dream, while putting you into a spring-loaded adjustable rate mortgage that would soon make your life a living hell.

One couple that I talked to moved into a home they purchased for $450,000, with a payment of $2400 a month.  They had three small children, and their dream was to raise them in such a home.  When they moved in, they had decided that they would live in that house for the rest of their lives.  They had to sacrifice a few things… one car had to go… probably would have to skip the family’s vacation for a couple of years to come, and she would have to get a job, but it would all be worth it because their dreams had come true the day they moved in to their new home.

Little did they realize that a year later, when the teaser rate on their loan ended, their payment would jump from $2400 to $4000 a month, which was about what they made each month combined.  They called WaMu, which was now Chase Bank, to ask them if they could refinance in order to get the payment down, as their loan officer had promised they could, but Chase said that their home’s value had fallen dramatically, and they were told that refinancing would no longer be possible.

For months they worked overtime and on weekends to make enough extra money to make the mortgage payment.  Her sister moved in and rented a room.  Their parents helped out as much as they could.  But when he was laid off and couldn’t find work for several months they fell behind… and never recovered.

They told me of the countless nights with no sleep, pacing the floor trying to think of some way to pay the mortgage.  He drank.  She cried.  They snapped at the children too often.  They fought with each other too often as well.  The day the moving truck pulled up to their dream home, no one talked.  No one listened to music.  No one even cried.  Their dream had become their worst nightmare, and they were one of the many thousands of families that would lose their home to foreclosure.

How could they have qualified for their loan, she wondered.  “We trusted the bank to tell us what we qualified for,” she told me.  “They never told us the payment could go up like that.”

Not all loans could be approved with “stated income,” and Tom’s team had that all figured out as well.

According to Margaret, “If the people couldn’t come up with the documentation, Tom’s team would just generate the pay check stubs or the bank statements or even tax returns, stick them in the file and tell me to sign off on it.  They also had a real estate broker, George I think, who would create the fake paperwork… for a kickback, of course, when it couldn’t be faked by the office.”

Margaret, on several occasions, would point out that a borrower didn’t have sufficient assets for the loan.   Right away, someone from Tom’s team would appear and take the file from her, something they weren’t supposed to do. Next thing she knew, the file would be returned and the required documentation had appeared out of nowhere and was now in the file.  On several occasions she was told, in no uncertain terms, not to make a big deal out of such issues.

Understandably, Tom and Mario became extremely popular guys in their low income “community”.  On many days, Margaret remembers long lines of people in the lobby waiting to see them.  They were the guys who could get you a loan no matter what… their motto was “yes we can”.  “Local real estate agents sent over their clients all the time… and got kickbacks for doing so,” Margaret confirmed.

They weren’t nice guys to work, for however, Margaret recalls.  “They were bullies.  They’d intimidate people all the time.  They’d throw a fit when anything wasn’t done their way.  There was no question that, even though they weren’t technically part of the bank’s local management team, it was their office and they would call all the shots.”

Margaret remembers Tom flaunting his money.  People said that he lived a few doors down from the actor Kevin Costner. At one point he bought a Rolls Royce, and another time the rumor was that he had bought a Mercedes from a famous rapper and the car had bulletproof glass.  He also bought dozens of rental properties, Margaret remembers.  “He’d buy them with cash and then refinance them at WaMu to get paid out,” she explains.

Every one at WaMu knew to stay out of Tom’s way and on his good side, because if not, he would have a fit and no one wanted to piss him off,” Margaret said.  “Tom’s a USC grad… he’s not stupid.  He’d threaten to take his team and leave if there was an issue.  In fact, WaMu built him his own office from ground up.”

Wells Fargo is paying the lease on that building today, or at least that’s what Margaret has been told by others in the industry.  Because even though Tom and Mario, created an operation that fraudulently pushing through hundreds of millions of dollars in toxic and destructive mortgages and therefore helped to create the largest bank failure in United States history, to say nothing of the families and lives that were destroyed as they lost their homes to foreclosure… when the banking world fell apart in 2008, instead of losing out, they didn’t miss a beat as Well Fargo picked up Tom’s whole team… because of their high production numbers, Margaret explained.

It would be one thing if the story of Tom Ramirez and Mario Loria at Washington Mutual’s Loan Processing Center was nothing more than the story of two rogue mortgage bankers who gamed the system and got away with millions in the end.  But it’s not true… Washington Mutual’s senior managers knew what was happening, and in fact they encouraged it.  We know that from testimony in front of the Senate Committee on Investigations, and the numerous similar stories that have only just begun to be heard by the American people.

Do you suppose the Toms and the Marios have any sense of what they did to the people they pushed into loans they could never afford to repay?  Do you suppose they feel shame?  Or do you suppose they would say the line I’ll never forget from the Viet Nam War years:

“It became necessary to destroy the village in order to save it.”

An American major after the destruction of the Vietnamese Village Ben Tre


What caused our nation’s economy to be thrown into the deepest recession since the 1930s was not borrowers buying homes they couldn’t afford.  It was the banks and others throughout the financial sector who had come to believe their own press.  Financial innovation had removed risk from the mortgage finance industry, the loans could be securitized, placed into Collateralized Debt Obligations, and mortgage backed securities, and then insured against default, through the purchase of credit default swaps.

And with no risk, the bankers took far too many changes.  The average Wall Street firm was leveraged 32:1, according to Bloomberg.  Wall Street believed that housing prices would never come down that significantly, and even if some areas did pull back, they had hedged their banks perfectly.

But when the investors that were holding the mortgage backed securities and other bond instruments, discovered during the summer of 2006, that the bonds that had been rated AAA, were certainly not.

After that, it was a fate accompli.  With no market for mortgage backed securities, the banks couldn’t continue to originate loans, and they began to hoard cash, and play games QSPEs, “off balance sheet transactions,” that would hide the toxic asset problems for some time.  Not forever, though.

As people see more and more clearly that it was the banks who caused all of this harm, that it was the banks that took on too much debt and accepted too much risk, there’s going to be a backlash against banks in this country, much like there was during the 1930s, that will last for many yyears.

Maybe this time we’ll all learn that if it lies like a bank, and it steals like a bank, and it lobbies like a bank… then it’s a bank.

And one day, perhaps very soon after that, we will start to heal as a nation, once we’ve come to realize that there is no percentage in being divided on every issue, and nothing to be gained by pointing fingers at each other, seeking to punish or to blame our neighbor as if he or she were the cause of our troubles.  And one day, even if it won’t be for many years, we’ll start to see our economy start to grow once again.

I wish this story was at its end, it makes me cry to picture the people’s lives that will never be the same because of bankers fixated on profits regardless the cost… but I’m afraid this is only the beginning.  So, until next time…

Mandelman out.



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