WaMu: The Preferred Lender For Alleged Southern California Flipping Operation?

In Southern California, the The Orange County Register chronicles how Washington Mutual was used by a Southern California real estate group to ostensibly finance a house flipping operation:

• [R]ecords show that Washington Mutual, America's largest savings and loan and one of its most precariously perched lending institutions, financed at least 43 mortgages worth $24.5 million on properties bought and sold by members of the Soni family(1) since early 2007.

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• The Soni family's transactions with WaMu, which took place from early 2007 through March of this year, indicate that Washington Mutual continued making risky loans long after its underwriting standards were supposedly tightened, said James Barth, a senior finance fellow at the Milken Institute in Santa Monica.

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• Home prices in Santa Ana peaked in 2006 and have fallen more than 40 percent since. While those prices were plummeting, members of the Sonis' family never sold for a loss. A Register analysis of 22 Santa Ana properties flipped by the family in the past two years shows a total gain on sale of $3.7 million.

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• In the past two years, Soni family members took out a total 14 mortgages with Wells Fargo, Countrywide Home Loans, Downey Savings & Loan, J.P. Morgan Chase Bank and HSBC Mortgage Corp. But Washington Mutual was their preferred lender, with triple that number of loans.

• One possible reason is suggested in a lawsuit filed in November by New York Attorney General Andrew Cuomo. The suit claims that Washington Mutual had a history of pressuring appraisers to give properties high valuations so it could make more money.

For more, see WaMu loaned millions to OC home flippers with a history of fraud (Troubled lender's mortgages helped family of real estate traders make millions as the market collapsed).

(1) According to the story, in August 2003 (before the current alleged flipping operation), an Orange County Superior Court jury found Vijay and Supriti Soni guilty of forgery, falsifying real estate documents, identity theft and grand theft. Vijay Soni was sentenced to a year in jail. He also surrendered his real estate license. Supriti Soni was convicted on 19 counts in the case and sentenced to three years in prison.