Monday, December 19, 2011

WaMu's Top Officers Pay Pennies on the Dollar to Settle FDIC Claims. What's the FDIC's Case Against LSI Appraisal of Lender Processing Services Worth?

In March of this year, the FDIC sued Washington Mutual's former CEO Kerry Killinger, its former chief operating officer Stephen Rotella and its former head of residential lending David Schneider for $900 million in alleged damages resulting from their "gross negligence" in running WaMu's residential lending business.  The FDIC claimed that their negligence caused what is the biggest bank failure in U.S. history.  It also alleged that two of them unlawfully transferred assets to their wives to protect the assets from potential collection efforts.  Despite those strong allegations, however, the FDIC is now settling that case in a settlement that apparently stipulates for a cash payment of only $40 million -- almost all of that coming from WaMu's insurers.  From their own pockets, the former CEO will pay only $275,000, the former chief operating officer will pay $100,000, and the former head of WaMu's residential lending will pay $50,000.

FDIC Judgment Against Individual Appraiser
Here's an interesting comparison -- individual residential real estate appraisers have had judgments entered against them by the FDIC relating to just one bad loan for much more than the total amount that the three former WaMu officers will pay out of their own pockets.  To be sure, the former officers of the failed lender did give up their right to collect "unpaid bonuses" and "severance pay."