Washington Mutual Inc. (WAMUQ), once the largest U.S. thrift, rewarded bankers for overcharging customers on subprime mortgages and selling the worst-performing loans to investors, a U.S. Senate panel concluded.
The lender gave its top producers free trips to places like Hawaii and the Bahamas in return for increasing mortgage volume, even as performance of the loans deteriorated, according to the Senate Permanent Subcommittee on Investigations report on the financial crisis.
“Loan officers and processors were paid primarily on volume, not primarily on the quality of their loans, and were paid more for issuing higher-risk loans,” the panel found. “Loan officers and mortgage brokers were also paid more when they got borrowers to pay higher interest rates, even if the borrower qualified for a lower rate — a practice that enriched WaMu in the short term, but made defaults more likely.”
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