Probing Golden West
NEW YORK (AP) - The Department of Justice is investigating the mortgage lending practices of Golden West Financial Corp., the savings and loan bought by Wachovia Corp. for $24 billion at the height of the housing boom in 2006.
U.S. Attorney Joseph Russoniello told The Associated Press Thursday that for the past two months his department has been looking into whether the California lender engaged in predatory lending practices.
Russoniello also said that the Justice Department, in conjunction with the Securities and Exchange Commission, is reviewing representations that were made to investors by Golden West during its sale to Wachovia.
Herb Sandler, who ran Golden West with his wife Marion, said Thursday that the couple has not been contacted by authorities.
"If there is an investigation, we would we would be delighted and happy to cooperate fully in every respect," he said.
He called the news of the investigation "strange and anomalous" given Golden West's "40-year track record for ethics and integrity." Golden West, which owned World Savings, had been widely praised by analysts for its conservative lending policies until its option-adjustable rate mortgages started to blow up after the Wachovia acquisition.
Charlotte, N.C.-based Wachovia, which is being sold to Wells Fargo & Co., has been saddled with mounting losses tied to the portfolio of the so-called Pick-a-Pay loans inherited through its purchase of Golden West. Defaults on option-ARMs, which gave borrowers the option of deferring the interest due on their monthly payments, have skyrocketed amid the crumbling of the housing market.
Spokespeople at the SEC, Wachovia and Wells Fargo declined to comment.
While Wachovia had been struggling for some time under the weight of losses from souring mortgages, federal regulators rushed to a sale of the bank after a $5 billion run on deposits in late September threatened its future. The run was sparked by the failure of West Coast rival Washington Mutual Inc., which was seized by regulators and later sold to JPMorgan Chase & Co. Washington Mutual was among the banks hit hardest by the mortgage mess.