The Securities and Exchange Commission is investigating how Washington Mutual, the nation’s largest savings and loan, handled mortgages that may have been based on inflated home appraisals, the Associated Press reported.
“After spending a month and a half investigating these allegations, we can say with confidence that there has been no systematic effort by WaMu to inflate home appraisals,” the company said in a statement.
Earlier this week, Fay Chapman, WaMu’s senior executive vice president and chief legal officer, announced her retirement. She said she will serve as a consultant to the company for two years.
The financial company also is a target of a shareholder class-action lawsuit. The complaint alleges that WaMu and some of its officers and directors failed to disclose material adverse facts about the company’s financial well-being, business relationships, and prospects.
Specifically, the suit claims the company failed to adequately disclose the extent of its exposure to anticipated losses and defaults in its lending portfolio, failed to adequately reserve for losses as conditions in the credit and housing markets deteriorated, and engaged in a conspiracy with other companies to artificially inflate the appraised value of homes for certain mortgages so as to boost the company’s reported loan-to-value ratios.