Category Archives: Bank Failures

Loan Modifications

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This is Part Three of a series of articles on the foreclosure process.
This article does not constitute legal advice.
Foreclosure laws vary from state to state.

Homeowners in financial distress should always hire legal counsel. Call your local state bar association for a referral.  Reduced or free legal aid may be available in some states. Ask for a referral from the state bar association or through a LOCAL HUD-Approved Housing Counseling Agency.

Loan modifications are becoming quite fashionable at the moment.  With underwriting guidelines continuing to tighten, some folks facing financial distress and possibly foreclosure may not qualify for a refinance at the retail level, meaning, going back to the bank, credit union, or mortage broker that helped the first time around.

At the present time, loan modification salespeople are completely unregulated.  This means a person can be working at Taco Time in the morning and selling loan modifications in the afternoon.  This is similar to the situation with unregulated loan originators during the real estate bubble run-up.  Advertisements that say, “Earn Six Figures. No Experience Necessary” are now making the rounds in the mortgage lending community. (Don’t believe me? Go to craigslist jobs and do a search under “loan modifications.” Current ads are saying: Make $15,000/month and Make $5,000/day). For the consumer, this means you are once again in the one-down position and it brings me great unhappiness to tell you that at this time you cannot and should not trust your loan modification salesperson.  This problem stems from the unfortunate situation LOs face as their six figure income dried up during the subprime meltdown but their desire for a six figure lifestyle is still around.  This is a systemic problem that our government regulators seems uninterested in addressing at this time. I’m predicting mass government intervention in foreclosures anyways. Perhaps the government is not worried about loan mod salesmen because they’re going to whack them with a big ugly stick quite soon.

In the meantime, we’re stuck with loan modification salesmen. The author of this blog post is of the opinion that consumers should be extremely wary of salemen asking for an upfront fee, even if they are claiming that all or most will be refunded if the modification should fail to be approved.

A loan modification is a good choice for a consumer whose financial distress is such that they are currently unable to pay their mortgage, prefer to stay in the home and not sell (I’m assuming owner occupied property), WILL be able to pay if the loan were modified at a lower interest rate or longer term, and the homeowner is able to fully document income and assets. The idea here is that it’s in everybody’s best interest to keep the homeowner paying the mortgage, even if it means lower bank earnings. (For other options, see part 2 of this series.)

Terms
Common loan modification terms include fixing the interest rate at a lower amount for a short period of time.  3 years, 5 years, 3 years with a gradual, stepped-up interest rate after the third year, longer amortization times such as amortizing the loan over 40 years instead of 30, are very common. Voluntary, principal balance haircuts offered by your bank are not common at this time, unless you are working with an attorney or an aggressive, pit-bull non-profit housing counseling agency. Before you think that a loan mod is the answer, take a long time to consider how much interest you’ll be paying over the life of that 40 year loan.  If you’re thinking “I can just refinance later” there are many people who now have a foreclosure in their recent past, who were given that same sales pitch in 2006.

Past Predatory Lending
If you were a victim of predatory lending, your attorney can use the evidence to extract better terms for your loan modification.  FIND YOUR ORIGINAL LOAN DOCUMENTS from the last time you refinanced or purchased the home: The original disclosures and then the final disclosures you recieved when you signed papers during escrow. If you cannot find them, call any local title insurance company. Give them your address. Ask them to pull the last deed recorded against your property. On that deed, the title company’s order number will be hand-written in the margin.  Call that title company, ask them to pull your file, and to tell you who the escrow company was that handled your file.  If your escrow company went out of business, your state department of financial institutions will have information on where those files are now.

State or Federal Law Violations
If your loan originator violated any state or federal laws when originating your loan, an attorney will be able to spot this information, which becomes extremely valuable when hammering on your lender to offer you the best loan mod terms, or to even bring action that will slow down the foreclosure process, buying you more time.

Process
Loan modification salesmen do nothing except collect a finders fee for finding and delivering you to the people who really do the work.  The loan mod company will ask you to assemble a wide variety of documents similar to when you applied for the mortgage loan.  Unless you went “stated income” the first time around.  This time it will be different.  Common documentation required includes two years of tax returns, two to six months worth of bank statements, 2 years of w-2s, paystubs for the last 4 months, a list of assets and liabilities, and a household budget showing the amount of money you CAN afford to pay on a monthly basis. The most important things lenders must analyze are 1) determining that the homeowner has zero assets/money in the bank and; 2) the homeowner’s ability to pay the modified payment.  There will be a worksheet to complete in which you will lay out your monthly budget.  This is the tricky part. You’ll have to prove that you cannot qualify to repay your current mortgage but that there is enough income coming in to qualify for a modified loan.

Legal Counsel
All loan modification candidates should retain their own, LOCAL legal counsel.  Loan Mod salesmen will tell you that attorneys will cost thousands and thousands of dollars. In one letter, the salesman is saying that attorneys will charge tens of thousands of dollars.  Wow. I’m scared now.  I’m so scared that I polled a handful of local attorneys and found that loan modification charges range anywhere from $1500 to $2500 depending on how many liens there are against the home.  In contrast, loan mod salesmen are charging anywhere from $3500 to $5000 UP FRONT and they use “a pool of attorneys” in god-knows what state. If you can’t do the math on that, then it’s time for you to think about renting.

Questions to ask a loan modification salesmen
1) What is your fee and how is it split between you, the loan mod company, and the attorney?
Failure to answer this question in a swift and forthright fashion is a big giant red flag.
2) What will YOU be doing for the fee you earn?
Listen to the answer very carefully.
3) What will the loan modification company be doing for their portion of the fee?
This question will typically be answered like this “They process the paperwork.”  Now repeat question 2.
4) May I talk directly with the attorney?
If the answer is no, find a local attorney.

Finding a local attorney
Use your favorite search engine to find your local state or county Bar Association.  Look for their “Attorney Referral Service” and seek out a real estate attorney or a consumer protection attorney. Make an appointment with a local attorney that you can talk to face to face. Trust me on this. Interview at least two if not three local attorneys. All may have a varying range of fees. Compare them with the loan mod salesmen’s fee.

Selecting a licensed loan originator to help you
In some states, it is not even possible for a loan originator or a Realtor to collect a fee for loan modification services. In Washington State and elsewhere, loan originators who work for a mortgage broker owe fiduciary duties to their clients. They are able to charge a fee-for-service (provided the fee is disclosed prior to the work being performed.)  Loan originators who are still left in the business as of this writing, are generally likely to be somewhat more competent than Taco Time/Loan Mod salesman.  But I am making an overgeneralization. A licensed LO has at the very least a nominal background in computing debt-to-income ratios and gathering documents. At this time, there are approximately zero loan orignators who have accumulated some experience performing loan modifications.  This is because nobody needed one up until about the year 2008…..the industry just refinanced you over and over again. If you select an LO who owes you higher duties, you are more likely to select someone who is conscientious of these higher duties because if you are not well-served, the LO now holds higher liability.  Fiduciary duties means that LO MUST put their client’s interests above their own interest in making a buck. They must set aside self-interest and work on behalf of you.  Hiring a loan originator to do the paperwork-gathering seems reasonable.  The loan originator MUST hand off your file at some point to an attorney.  Consumers, please demand that the attorney be local.  A fiduciary may not engage in secret fee-splitting deals. The fiduciary owes the highest degree of honesty and good faith to the consumer.  The LO/fiduciary has a duty to answer you honestly about how much of the fee goes to the LO and how much will go to the attorney.  A good scenario is to hire the LO/fiduciary to do the nominal processing work, for which you would pay a nominal “paperwork processing” fee and then pay your local attorney separately.

Working with Non-Profits
A HUD-Approved Housing Counseling Agency can help homeowners obtain a loan modification at no cost. 

DIY
Lenders charge zero to perform a loan modification.  If you’re an adventerous type that does not need hand-holding, call your lender direct in order to begin your loan modification.  I still advise hiring a local attorney to review the lender’s loan mod paperwork with you.

Currently, 40 to 50 percent of all loan modifications are re-defaulting.  This is astronomically high and will translate into higher bank losses and lost time for the homeowner to begin rebuilding his or her credit rating. This means some folks may simply need to re-enter the housing market as a renter. In part 4 of this series, we will discuss what it means to start rebuilding after foreclosure and in part five we’ll tackle what is surely ahead: massive government intervention.

Part one: Foreclosure; Losing the American Dream
Part two: Options for Homeowners Facing Foreclosure
Part three: Loan Modifications
Part four: Government Intervention in Foreclosure
Part five: Foreclosure; Letting Go and Rebuilding

Another Bailout Coming for the Banks Disguised as a Bailout for Homeowners

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From the WaPo:

Officials with the Treasury and the Federal Deposit Insurance Corp. are crafting a plan under which the government would guarantee the mortgages of as many as 3 million homeowners now struggling to avoid foreclosure, according to three sources familiar with the discussions.

Under the program being discussed, the lender would agree to reduce borrowers’ monthly payments, for example by lowering the interest rate or principal of a mortgage loan, based on the homeowner’s ability to pay. These reconfigured loans could help homeowners avert foreclosure.

To attract financial institutions to the program, the government would then guarantee to repay the lender for a portion of its loss if the borrower defaulted on the reconfigured loan.

The mortgage guarantee program would vastly expand the role of the Treasury Department in helping homeowners, while at the same time ensuring some return for lenders.

It would cost between $40 billion and $50 billion, sources said.

The program is being discussed as members of Congress are voicing frustrations that the $700 billion rescue program thusfar has been aimed at helping banks, but not homeowners.

While Treasury and FDIC officials have reached an agreement on the principles of the program, the White House is resisting, according to the sources, who declined to be identified because the negotiations are ongoing..

Wait, what? I thought the FHA Secure program was such a grand success, according to HUD.  Yet reports show that the true number of homeowners helped under that program was unfortunately low which I predicted in Aug of 2007. The July bailout bill gave us Hope for Homeowners, which requires voluntary principal balance reductions on the existing loans and gave the homeowner a new FHA-insured loan. Housing Wire reports that so far, H4H has few takers. But not for lack of interested homeowners. Instead, it’s the investors:

The problem, however, may not be lenders, who say they’re more than willing to begin processing the loans. Instead, the problem sits with third-party investors that have thus far proven unwilling to take the minimum 10 percent haircut required to put borrowers into the program, plus an upfront premium payment–losses are actually far greater for investors who participate, given that the 10 percent figure is based on a current appraisal, and not original LTV.

John Sorgenfrei, president of Florida-based Assurance Home Loan, Inc., said he receives calls from eight to 10 borrowers daily about participation in the program. For the time being, he has been forced to make them wait, as no investors so far have bought into the program..

We’re burning through the 700 billion Troubled Asset Relief Program (TARP) money pretty fast.  The 40 to 50 billion tossed out for this new plan seems sadly low.  Who is feeding the politicians the dollar amounts?  This is not nearly enough money. It may keep the banks alive for a few more months but to what end?

Do you think this latest proposal seems more like another bank bailout? It’s hard to say until we see the guidelines. With FHA and H4H, income must be fully documented and homeowners must qualify. Once again, this may shave off a fair number of homeowners who won’t be able to document income needed to qualify.

It might be wiser to just start talking about nationalizing the entire banking system at this point.  I mean, how many bailouts will it take before taxpayers own the banks?

Will the U.S. Now Begin to Take Ownership Positions in Banks?

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From the NY Times: U.S. May Take Ownership Stake in Banks

Having tried without success to unlock frozen credit markets, the Treasury Department is considering taking ownership stakes in many United States banks to try to restore confidence in the financial system …

Treasury officials say the just-passed $700 billion bailout bill gives them the authority to inject cash directly into banks that request it. Such a move would quickly strengthen banks’ balance sheets and, officials hope, persuade them to resume lending. In return, the law gives the Treasury the right to take ownership positions in banks, including healthy ones.

Hat tip CR who says, “The proposal resembles one announced on Wednesday in Britain.”

Sounds like the Treasury is trying to work as fast as they can.

The House Votes YES on the Revised Bailout Bill

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Watch live on CNBC here.  Speaker Nancy Pelosi addressing the House.
Voting on the AMDENDMENT now taking place.

So far:
263 Yea
171 Nay
218 needed

Update: Here’s the roll call.
Here’s how Washington State’s Representatives voted (district map)
Hat tip SeattleBubble:

YES:

  • District 2 – Rick Larsen (D)
  • District 3 – Brian Baird (D)
  • District 6 – Norm Dicks (D)
  • District 9 – Adam Smith (D)

NO:

  • District 1 – Jay Inslee (D)
  • District 4 – Doc Hastings (R)
  • District 5 – Cathy McMorris Rodgers (R)
  • District 7 – Jim McDermott (D) (voted YES first time around)
  • District 8 – Dave Reichert (R)

CNBC reporting rumor that Fed will do an emergency 50 bps cut after the bill passes …hat tip CR

Will the bailout bill do what it’s suppose to do: help “stabilize the economy?” Perhaps the markets have been rescued…for now.

Senate Votes YES on the Bailout

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Watching the Senate testimony and voting on the Bailout Bill via C-Span.  I hear that Maria Cantwell and Patty Murray are coming out against the bill from statements posted on their website. Hat tip perfectfire at SB.

Democrat Majority Leader Harry Reid is making a speech pleading for passage.

So far the Ayes are adding up very fast.
Cantwell votes NO.
Murray votes YES.

McCain: YES
Obama: YES

Yes: 74
No: 25

Now the bill will go back to the House.

Draft Proposal on Financial Rescue Regulation

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The House votes on Monday and the Senate apparently will vote on Wednesday.  Here is the “Draft Proposal on Financial Rescue Legislation”

From Office of Speaker Nancy Pelosi — Sept. 28, 2008
REINVEST, REIMBURSE, REFORM
IMPROVING THE FINANCIAL RESCUE LEGISLATION

Significant bipartisan work has built consensus around dramatic improvements to the original Bush-Paulson plan to stabilize American financial markets — including cutting in half the Administration’s initial request for $700 billion and requiring Congressional review for any future commitment of taxpayers’ funds. If the government loses money, the financial industry will pay back the taxpayers.

3 Phases of a Financial Rescue with Strong Taxpayer Protections

Reinvest in the troubled financial markets … to stabilize our economy and insulate Main Street from Wall Street

Reimburse the taxpayer … through ownership of shares and appreciation in the value of purchased assets

Reform business-as-usual on Wall Street … strong Congressional oversight and no golden parachutes

CRITICAL IMPROVEMENTS TO THE RESCUE PLAN

Democrats have insisted from day one on substantial changes to make the Bush-Paulson plan acceptable — protecting American taxpayers and Main Street — and these elements will be included in the legislation

Protection for taxpayers, ensuring THEY share IN ANY profits

Cuts the payment of $700 billion in half and conditions future payments on Congressional review

Gives taxpayers an ownership stake and profit-making opportunities with participating companies

Puts taxpayers first in line to recover assets if participating company fails

Guarantees taxpayers are repaid in full — if other protections have not actually produced a profit

Allows the government to purchase troubled assets from pension plans, local governments, and small banks that serve low- and middle-income families

Limits on excessive compensation for CEOs and executives

New restrictions on CEO and executive compensation for participating companies:

No multi-million dollar golden parachutes

Limits CEO compensation that encourages unnecessary risk-taking

Recovers bonuses paid based on promised gains that later turn out to be false or inaccurate

Strong independent oversight and transparency

Four separate independent oversight entities or processes to protect the taxpayer

A strong oversight board appointed by bipartisan leaders of Congress

A GAO presence at Treasury to oversee the program and conduct audits to ensure strong internal controls, and to prevent waste, fraud, and abuse

An independent Inspector General to monitor the Treasury Secretary’s decisions
Transparency — requiring posting of transactions online — to help jumpstart private sector demand

Meaningful judicial review of the Treasury Secretary’s actions

Help to prevent home foreclosures crippling the American economy

The government can use its power as the owner of mortgages and mortgage backed securities to facilitate loan modifications (such as, reduced principal or interest rate, lengthened time to pay back the mortgage) to help reduce the 2 million projected foreclosures in the next year

Extends provision (passed earlier in this Congress) to stop tax liability on mortgage foreclosures

Helps save small businesses that need credit by aiding small community banks hurt by the mortgage crisis—allowing these banks to deduct losses from investments in Fannie Mae and Freddie Mac stocks.

Brad DeLong has a better idea: nationalization and “it’s the best way to deal with the moral hazard problem.”

Paul Krugman agrees with Brad DeLong but ponders whether nationalization has broad political support.

Nouriel Roubini says the bailout is a “Disgrace and Rip-Off.”

This way of recapitalizing financial institutions is a total rip-off that will mostly benefit – at a huge expense for the US taxpayer – the common and preferred shareholders and even unsecured creditors of the banks. Even the late addition of some warrants that the government will get in exchange of this massive injection of public money is only a cosmetic fig leaf of dubious value as the form and size of such warrants is totally vague and fuzzy.

Seems like the only people who are happy with the draft proposal are the politicians. Seems like both presidential candidates are supporting it.

“This is something that all of us will swallow hard and go forward with,” Republican John McCain said in an interview with the ABC television network. “The option of doing nothing is simply not an acceptable option.”

Democrat Barack Obama said he was likely to back the package. “My inclination is to support it,” he told CBS television’s “Face the Nation.”
 

Update: Here is the 108 page PDF of the bill, now called the ‘‘Emergency Economic Stabilization Act of 2008’’.

The Bad Reputation of RMBS

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I was in Mill Creek earlier this evening having sushi with my daughters and everytime we drive down into Mill Creek I say the same thing: “I remember when this whole place was nothing but trees!” They’ve already heard the stories about how I use to leave the house at dawn with the neighborhood boys and play in the woods all day until dinner time.  But they haven’t heard the stories about the banks.  As I was driving back up the hill, I was stopped at a horribly long stop light which gave me time to ponder the bank to my left, a Wells Fargo, and educate my children: “That bank use to be a First Interstate Bank.  Before that it was an Olympic Bank.” Before that it was something else.

With so much shock and awe over the past few days about the possible imending doom headed our way unless we quickly pass Paulson’s bailout plan, and all the taxpayer backlash on the blogs as well as being reported in the MSM, the new question becomes, well what are some other worthwhile ideas for how to get us out of this mess?  Today, Dr. Krugman suggests that we consider anything coming out of Henry Paulsen’s mouth to be a lie.  This might be a good way to solve the financial crisis extremely fast.

“So, this morning Hank Paulson told a whopper:

“We gave you a simple, three-page legislative outline and I thought it would have been presumptuous for us on that outline to come up with an oversight mechanism. That’s the role of Congress, that’s something we’re going to work on together. So if any of you felt that I didn’t believe that we needed oversight: I believe we need oversight. We need oversight.”

What the the proposal actually did, of course, was explicitly rule out any oversight, plus grant immunity from future review. Read more here.

 
Want to see Henry Paulson in action? Watch this quick video. When he’s testifying, at the part where he says “I want oversight” watch his head go back and forth in a “no” motion.  I tend to believe people’s nonverbal signals over the words they say. 

The Paulson/Bernanke bailout plan details are starting to rise to the surface:

One thing is clear – something we all guessed correctly – is that the intention of the plan is to pay premium prices for troubled assets to recapitalize the banks. It’s still not clear how the price mechanism will work, and unfortunately Paulson and Bernanke are unable to describe how this will work..

This means the TARP plan would buy assets from banks at a higher price than what the banks could get if they tried to sell them at fair market value. Bernanke and Paulson believe the assets are being unfairly underpriced in the free market because of their bad reputation so instead, they’re proposing that the taxpayers subsidize the re-capitalization of the banks.

One analyst says it would take at least 5 trillion for the proposed plant to work.

Why not let the banks come clean and sell their assets at today’s prices, and we can spend taxpayer money building back up the FDIC insurance fund. Weaker banks will fail and stronger banks will buy the assets of the weaker banks from bankor from the FDIC after failure.  Big banks like WaMu could be split up into smaller entities which will be easier for many different banks to absorb. 

Eleua, a frequent commenter on this blog, has been working with a group of other like-minded individuals and he has penned an outline for a solution here:

There is a solution that costs the government nothing, eliminates “moral hazard,

Blog Roundup on the Bailout Proposal

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Calculated Risk
Paulson Plan: Will it Work?

The primary goal of the Paulson Plan is to get the banks to lend again – or “unclog the system” as Secretary Paulson put it. Secondary goals are to “protect the taxpayer” and hopefully minimize moral hazard.

Will the plan achieve the primary goal? I think the answer is yes. By removing these troubled assets from the balance sheets of the financial institutions, the banks will able to lend again without lingering doubts about their solvency and viability. At first glance, the size of the plan seems sufficient.

It is almost guaranteed that there will be unintended and unanticipated consequences, but the plan will probably achieve the primary goal. And making sure the banks continue to lend will minimize the impact of the credit crisis on the general economy.

Unfortunately the Plan fails to address the secondary goals….

Yves at Naked Capitalism:
Why You Should Hate the Treasury Bailout Propsal

the shockingly short, sweeping text of the proposed legislation has lead to reactions of consternation among the knowledgeable, but whether this translates into enough popular ire fast enough to restrain this freight train remains to be seen.

First, let’s focus on the aspect that should get the proposal dinged (or renegotiated) regardless of any possible merit, namely, that it gives the Treasury imperial power with respect to a simply huge amount of funds. $700 billion is comparable to the hard cost of the Iraq war, bigger than the annual Pentagon budget. And mind you, $700 billion is not the maximum that the Treasury may spend, it’s the ceiling on the outstandings at any one time. It’s a balance sheet number, not an expenditure limit.

But here is the truly offensive section of an overreaching piece of legislation: Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

Dr./Prof. Paul Krugman
Thinking the Bailout Through

…the plan does nothing to address the lack of capital unless the Treasury overpays for assets. And if that’s the real plan, Congress has every right to balk.
So what should be done? Well, let’s think about how, until Paulson hit the panic button, the private sector was supposed to work this out: financial firms were supposed to recapitalize, bringing in outside investors to bulk up their capital base. That is, the private sector was supposed to cut off the problem at stage 2.

It now appears that isn’t happening, and public intervention is needed. But in that case, shouldn’t the public intervention also be at stage 2 — that is, shouldn’t it take the form of public injections of capital, in return for a stake in the upside?

Let’s not be railroaded into accepting an enormously expensive plan that doesn’t seem to address the real problem..

Housing Wire
U.S. Taxpayers to Bail Out Foreign Debtholders too?

“Participating financial institutions must have significant operations in the U.S., unless the Secretary makes a determination, in consultation with the Chairman of the Federal Reserve, that broader eligibility is necessary to effectively stabilize financial markets,

Are you ready for FEMA Mortgage?

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Congress and Treasury Secretary Hank Paulson are working this weekend to hash out details of the proposed $700,000,000,000 bailout during this amazing time in American history.  My brother-in-law is an adjuster for FEMA, spending months away from his home evaluating damaged property across the country.   FEMA Mortgage could be created to essentially do the same thing.

Now that Uncle Sam will be buying bad mortgages, they could utilize FEMA mortgage adjusters to evaluate the borrowers current situation:

  • Can they afford their mortgage payment? 
  • Is this a situation worth modifying their existing loan?
  • Was income over-stated or not verified with the mortgage?
  • Was the property purchased as owner occupied and it’s now an investment property? 
  • Are there signs of mortgage fraud?

Home owners in trouble who have financial ability to stay in their home, would have the opportunity to re-qualify at either a lower rate and/or reduced loan amount with a silent second that would be called due if the home owner sold the property within a certain period of time (similar to State bond programs).   This would be available to home owners who were having difficulty due to an ARM adjusting or perhaps a financial set back that is now resolved (such as temporary loss of employment).    Loan modifications with Uncle Sam owned mortgages would be streamlined, very low cost  and legit.

Home owners who could not re-qualify based on their actual income, may have the opportunity to rent a property at a payment they can afford.  Having property occupied as a rental is better than abandoned–for that home and for the neighborhood.   Perhaps Uncle Sam will start FEMA Property Management…they can even re-use some of the trailers they bought for Huricane Katrina.  

If fraud was used on a mortgage now owned by Uncle Sam, the FEMA Loan Adjuster would determine if it was caused by the borrower or loan originator and proper actions would be taken.

A plan such as this, could provide jobs for out of work Loan Originators (of course they would have to pass the National Licensing requirements) and employ Real Estate Agents, builders and contractors, too.   FEMA Adjusters could also determine which foreclosed properties, owned by Uncle Sam, need repair before it can be resold at a higher value or if they should just be sold “as is”.

Your thoughts?

WaMu Endgame

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Surprise: WaMu is looking for a buyer.  From the New York Times:

Goldman Sachs, which Washington Mutual has hired, started the process several days ago, these people said. Among the potential bidders that Goldman has talked to are Wells Fargo, JPMorgan Chase and HSBC. But no buyers may materialize. That could force the government to place Washington Mutual into conservatorship, like IndyMac, or find a bridge-bank solution, which was extended to thrifts in the new housing regulations.

Citigroup is also considering an offer, but would likely be able to buy Washington Mutual only if it emerged from a receivership, according to a person close to the situation. JPMorgan is maintaining its posture that it will not bid unless it receives government support, according to another person briefed on the matter.

I’m not so sure that any bank is in shape to purchase WaMu in its current form. Perhaps it could be broken up into smaller pieces. Its deposit base is probably worth more than anything else on its books right now.

I’m sad. I can remember walking into Washington Mutual Savings in Downtown Everett on the corner of Colby and Pacific with my dad to open up a passbook savings account.  I’ve had an account there just about my whole life.  My daughter’s school savings accounts are there.  I know many people who work at WaMu.  I worked at WaMu as a bank teller many years ago under a very smart, savvy woman named Margaret Bradley who was a very fine role model for a young woman like me in the early 1980s.  Washington Mutual was “The Friend of the Family.”  I bought that old commercial line and repeated it for years.

I know. It’s just a bank.  I’ll get over it. 

There are many WaMu employees that live and work here in the Seattle area who had much of their retirement investments within WaMu’s stock options.  Whatever the outcome, this can’t bode well for our employment numbers here in the greater Seattle area.  I’m under the FDIC limit and will keep my accounts open, and will not be moving them to a new bank. I’ll be seeing this through with them. 

This makes me wonder if it will be easier for homeowners to get their short sales and loan modifications approved. 

Wall St Journal: TPG Move Opens Doors for WaMu

Bloomberg: WaMu’s Biggest Shareholder Waives Compensation Pact

Calculated Risk: WaMu For Sale

Seattle Times: With Stock Sinking, WaMu Appears Headed for Sale

Seattle PI: WaMu Puts Itself up For Sale