Class Action Take Two

Servicing issues accompanying Washington Mutual\'s acquisitions
By SAM GARCIA
1/31/2002

A San Francisco-based law firm has filed a class action complaint in Seattle on behalf of a group of nationwide homeowners against Washington Mutual (WaMu) for allegedly improperly servicing its mortgages. According to the complaint filed by the law firm of Green Fauth & Jigarjian, LLP (GFJ), the servicing mistakes allegedly result "in poor customer service in which borrowers spend untold hours attempting to correct Washington Mutual's errors, improper fees paid by borrowers for which they are not reimbursed, and erroneous negative reports to credit bureaus."

According to this week's announcement, the complaint makes the following allegations, which primarily relate to problems arising after WaMu acquired the servicing portfolios of other banks like PNC Mortgage and Fleet Mortgage:

* Washington Mutual loses mortgage payments
* Washington Mutual fails to timely post mortgage payments
* Washington Mutual fails to properly post mortgage payments
* Washington Mutual fails to properly draft electronic mortgage payments
* Washington Mutual fails to maintain accurate account records.

Jenelle Welling, an attorney for GFJ, told MortgageDaily.com that she also was involved in another class action filed early last year against Washington Mutual Inc., Bank United Corp., and Bank United of Texas, FSB. That suit, also filed in Washington state, was filed by the law firm of Girard & Green, LLP while Ms. Welling was employed there. She said that the earlier lawsuit was on behalf of customers acquired through WaMu's merger with Bank United, while the current class action is directly against WaMu on behalf of all WaMu borrowers.

Ms. Welling said that another law firm that also announced a class action filed against Washington Mutual early last year was actually just the co-counsel on the Bank United action.

Washington Mutual, which recently completed the acquisition of Dime Bank and is in the process of acquiring HomeSide Lending from National Australia Bank, has been on a voracious acquisition binge. While the moves have helped the company become one of the largest U.S. lenders, customer satisfaction appears to be lacking in many cases.

Most of the consumers that have written to MortgageDaily.com about lender problems are WaMu borrowers. One borrower -- who is also a mortgage industry insider -- said that while WaMu says it will compensate her for penalties & interest resulting from a missed property tax payment, she is frustrated that she will lose the income tax deduction for that portion of her property taxes this year. She said that if the problems with her property tax payments continue, she will consider joining the current class action against WaMu.

An employee from the production side of Washington Mutual, whose comments were made on the condition of anonymity, told MortgageDaily.com that calls from customers complaining about servicing issues are not uncommon. He did say, however, that he has seen an improvement recently.

Kevin Horn, who works in the public relations department for WaMu's home loans and insurance services group, told MortgageDaily.com that the company's shear size will result in more servicing issues even if there are problems on only a small percentage of the loans.

WaMu reported that its servicing portfolio was $535 billion as of December 31.

Mr. Horn said that WaMu, which has yet to integrate the Fleet portfolio, has added servicing centers and taken other steps to increase servicing capacity.

Last June the Associated Press reported that a Mississippi jury awarded more than $71 million in damages to plaintiffs who accused a WaMu subsidiary, acquired through the 1997 purchase of Great Western Financial, of goading customers into renewing loans with undisclosed additional charges.
MortgageDaily.com
In an unrelated announcement, American Residential Investment Trust, Inc. said that it has entered into an arbitration agreement with WaMu subsidiary Long Beach Mortgage Company, which was among defendants named in a January 2001 lawsuit. In that lawsuit, American Residential sought to recover damages arising from its purchase of a pool of residential mortgages from Lehman Capital in late 1997 and early 1998.

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