A new report lays the blame for much of Detroit’s foreclosure problems at the feet of one of the nation’s largest mortgage lenders.
In 2003, Washington Mutual Bank’s CEO said he wanted to turn his bank into “the Wal-Mart of Banking." His plan was to focus on low and moderate income borrowers deemed “too risky” by other lenders.
By 2008, federal regulators seized Washington Mutual and the company filed for bankruptcy protection.
Washington Mutual had taken major losses in the subprime loan market. Its subsidiary, Long Beach Mortgage Corporation was for a time the second biggest subprime mortgage lender in Detroit. Between 2005 and 2007, more than half of those loans ended in foreclosure.
Michigan U.S. Senator Carl Levin says Washington Mutual’s subprime loan practices “devastated” neighborhoods and families in Detroit. At the end of a year long investigation, Levin’s released a report blaming reckless lending and lax federal oversight for the near collapse of the nation’s banking system in 2008.
Levin says it’s an example of “greed and deception.”
The senator says he’s referring his findings to the Justice Department and the Securities & Exchange Commission.