Apr 13, 2010 - in 2015: no. ,,',"'"". G.i" fcom ...... Goals were largely driven by overall market share growth ...... S
United States Senate
PERMANENT SUBCOMMITTEE ON INVESTIGATIONS Committee on Homeland Security and Governmental Affairs Carl Levin, Chairman Tom Coburn, Ranking Minority Member
EXHIBITS Hearing On
WALL STREET AND THE FINANCIAL CRISIS: THE ROLE OF HIGH RISK HOME LOANS April 13, 2010
199 Russell Senate Office Building, Washington, D.C. 20510
United States Senate PERMANENT SUBCOMMITTEE ON INVESTIGATIONS Committee on Homeland Security and Governmental Affairs Carl Levin, Chairman Tom Coburn, Ranking Minority Member
EXHIBIT
LIST
Hearing On
WALL STREET AND THE FINANCIAL CRISIS: THE ROLE OF HIGH RISK HOME LOANS April 13, 2010
1.
a. Memorandum from Permanent Subcommittee on Investigations Chairman Carl Levin and Ranking Minority Member Tom Coburn to the Members of the Subcommittee. b. Washington Mutual Practices That Created A Mortgage Time Bomb, chart prepared by the Permanent Subcommittee on Investigations. c. Securitizations of Washington Mutual Subprime Home Loans, chart prepared by the Permanent Subcommittee on Investigations. d. Washington Mutual’s Subprime Lender: Long Beach Mortgage Corporation (“LBMC”) Lending and Securitization Deficiencies, chart prepared by the Permanent Subcommittee on Investigations. e. Washington Mutual’s Prime Home Loan Lending and Securitization Deficiencies, chart prepared by the Permanent Subcommittee on Investigations. f. Washington Mutual Compensation and Incentives, chart prepared by the Permanent Subcommittee on Investigations. g. Select Delinquency and Loss '''''·1'''
_F1CORlrch·ls1s
1
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575
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70%
645
60%
635
5O'Mo
625
4O'Mo
615
30%
605
20%
595
10% 0%
i~i
100% 90%
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30%
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575
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675 665 655
7O'Mo
645
60%
635
5O'Mo
625
40%
615
:lO%
605
20%
595
RofI (no cashout)· 31d.
-o-FlCO Roll (no cashout) - 2nds
585 ....."'""-'_ _ _ _:u 575
-l&.prime first mortgages, AltA mortgages and proprietary products such as Mortgage Plus. From a financial standpoint, we expect Home Loans to earn approximately $400 million in 2008, up from a loss of $28 miliion in 2007. The effICiency ratio is projected to be 67% and the ROTE to be 12.1% in 2008. In short, Home Loans has a huge number of initiatives under way which need to be completed. We are making progress in improving efficiency, but we
CONADENTIAl
Page 9 of 10
CJn.fidential Treatrnerit Requested by JPMC
JPM_"
need improved gain-on-sale margins and the building of more loans in the portfolio in order to achieve our targeted returns on capital.
People Initiatives We wof1(ed very hard to build a management team capable of leading WaMu to the next level. OVer a five.. year period, we replaced the majortty of our executive and senior leaders. I believe the new team reflects a good balance of longer-tenured Wamutians and those with wo~ experiences a1 large financial services companies. \Nhen we fifSl brought this team together, there were ooncems that we were moving away from the "old" WaMu ruiture and yet there were others who believed we were not moving fast enough. Today, those noises have much settled dO'Ml and the ccxrbined teams are building the newWaMu. Our leadership development initiatives are paying off with nearly 80% of our senior-level positions being filled from wilhln, up from 50% a few years ago. The formal talent management process has become instiutionalized and the Executive Committee routinely works on identifying high-potential talent and offering that talent ever~nding roles of responsibility. Over the past 12 months, we reduced staffing by 10,000. We worried that this reduction would take a toll on morale, engagement, and the prndicing of the WaMu values. However, we have been very ~eased with the results of the latest alkmployee survey. An im~e 88% of our employees responded to the survey, up from 73% a year ago. Our employee-engagement index inaeased to 73%, up from 64% las!. year. Our overall values Index ina-eased to 81%, up from 74% a year ago. And of special note was the large jump In the fair, caring and human values scores. On the challenge frori, SeatHe continues to be a difficult place to rea\Jit top performers. This is especially the case for people with capital markets and other sophisticated financial skills. Many people just don't want to risk ooming to a place wtlere there are limited emlEymert opportunities. Another challenge is attrading and retaining diverse executive-level employees. We have a number of iniliatNes under way, but we need to make more progress. Finally, our pay programs are not producing targeted awards because our stock has not performed 'Well OIIerthe past three years. We exped this to take care of itself as our price performs better, but this Is an issue at this time.
ef'.lF1DENTIAL Page 10 of 10 Confidential Treatment Requested by JPMC
Home Loans - 2007 Strategy Team Goals GOALS
,',
WEIGHT
2007 GOAL
2007 YTD Actuals
,,~
$1 .9 B
$20'M(11I t 2f01 YTO) Net. SubPllm. ptoctJe\lon hektd In
GROWTH.,..-4S%
•c::n.... Nonprime e:ql.nsiofl 'nililbn _ _
IwVIIs III" C-..nel OIm;t and Ret"
.. "••
• SupPOrt production cnannel inill,tiws ."oel,t,d \'11th
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~ort volurre
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ov.r~.
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~t.d "~IIU' I'i(t"o-margln Pi'Oduc11oev1 (Subprime. M· . AlIA, • OA HE)
• Dt~oP proe." 10 m" N I Voellli r1I!UII to mont« qu.Uy 01 nonprlml
,.
TOO
Not ultcltd 10 p&'1eJplleln projeet
h .e MRetail 0,,:..,",1
SU MYTO
cort:1bu~on
S.
'M~Mlon
'.~~waMU
Upd.t.d 1111W7
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$478 (Oct 'fTO ll'I.w Impl.mentdon ptOClI$l
dI\'9l1iul"~
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• AchI,ve apex Champion etl'llftctllon
.
• Rigorous locus on pro)tc: l ... d 5COPf menllglmert
EWIIu.llld 4 t_ltctiom. I
'1)eY1lop ntW busintu d'~m«11 oppor1lA'11ly
• Elltbhh d ..... opmtnt pten lor ,1ICh teem mfrrtl., • OorItIop luc:cf$lion plen for .ech tum memb«
'IneUslon 0' RlsII rtpr'Stonl'~VK In PfO'Tllm OV&r'Sght
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LfIJ P!'09"lm end "Insi~on,d I8dIcl_ "Im,ltd SlV'I 01 $13 .3M tn'IueI~ - $3.75M reeiztd YTO
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• Il'J1)t,ment CU~LE' ol,xpenff r,ductlon
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• Ongotng ontl-on-ol'lll ..,lion, II'Ilhlum • C .....,. p"nrmg meetings
• Rllnsn OMGpment Plans
",a,. tum)
0
Management Presentation
-
WaMu Marketshare Product Option ARM 0r111~1Nl1 2006 Fur YHr
OpUan ARM OfIgIrlllJoo, :007 FulV..r
M._
RanI! 1
.::t::::: ,
• I
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!tender
:{!lvrne $10 ,0
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1 2 3 "
.. 5:.
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EMCMorigaVIrHtyMet Am.rIc., HOIII'
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G....rAln! Mang'lII
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GclcltnWnl
GMACRtlC8p Llllm," BroIh." B.nkofAmet1t1 TOI.IOrtjjlnallorn
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I .'
' .1 $2$5.0
Convdonll ConFormIng OIfDNtlOnt 2008 FuN YBBI
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CoIM'I\J)WIc» Wells F.rgo Ch_ HomtI fqne. B.nk d Americ:.
WlStllngtvn:1tUU8:
B 7 8
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ABNAMRO &mTrua
Cll:iMcrtgIIg.
GMAC Rnk*1t1a1 Horr.
T0Ia! Orlginlllion.
12.2'1.
Hi..
5,'"
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5181 .0
18.9%
122.2
12.3%
715.0
. 58.'
...,
1.'" 5.'" -S.l%
49.9 43.0 211.2
4.3%
,.lA..•' $990.0
5."" 2.'" 2.'" 2.5%
.
...
M.... VoI~
!.en'"
1 :. : : :W.....lto1l ,..iitU.r ,, W"""" ,• Courirywld.
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Ccn.Mlonll Confarmlng Origln.ion. 2007 FlAl Y_
'''''''' .. , eo..mry.o
~
, • or • • .: .. • """" .. " 2
Volume
$268.1
W.hFargo
l:n.B
Ch,,, Hom. Fln.ne.
105.5 91.5 72.B -48.11
CitiMDl'tgllgll
5
7
s.,k Americ:l GMAC Rnidlwltiel &..1Tru.
~rilitori i\uu ..
N,lIon.' Oly Tot.! Origin.tlon.
..
..... ...... 23.1% 11 .9% 9.1% 1.~
...,
•.'"
33.2 25.1
2....
.. 3U ·
8.3" 3.15% 3.1" 2.2%
$1,181.5
Sown: In.lde Moffgege Fln.nct
99
JP~ ~02447808
WaMu Marketshare - Product ARM Origlnatlonll 2006 Full '(filar
ARM Originations 2007 Full Year
M..... Volume
1 2
Countrywide Willis Fargo
'" 5 8 7
$210.9 180.0
15.7% 1 UI"Ao
Chu. Home Fln.nee
85.5
6.4%
Indy Mac EMC Mortgage GMAC Res Cap CitiMorigage Golden West New Century
59.0 58.0 52.6
4.4% 4.2% 3.9%
50.5 44.0 41 .7
::'::f :::: ;W.hlngton:Muiuet :::::::':::; :::Ho:r.:::::::::::8i~~:'
8 9 10
TotalOrignat!ons
I 2 3,
•,5 1
••
10
Lender
Country,oAde Web Fargo
.. .3 .....
Counlrywlc!e Chase Home FInance ~~I.s .F~go ..
::; ;4 ::::: ~~!"gt~M.~~~ ..
15.1'"4
83.1
11 .6%
71 .7
....
5....
42.6 40.0
3.8%
8
Wlchovll
3.3% 3.1%
9 10
GMAC Res Cap EMC Mongago
24.3 20 .•
To"IOrfginilUons
g~~"(i
87.9 ;:-:
33.5 27.3
$1,3040.0
....
SH19.2
CitiMortgage IndyMlc Lehman Brothers
5.5% 4.6% 3.8% 3,4% 2.8%
$724,0
Prime Jumbo Origin.tlons 2007 Fun Ye.r
Volume
Martlel Sh...
S10M
22 ,'"
73.1
Waahlnllton Ml,ltull
!i~. 5
15.2% 11.1%
CklMortgage alnk of Americ. Chile Home Fillnc:e Amerieln Home SunTnJlt GMAC Res CIP GMAC Residential
35.3 27.5 19.2
7.4% 5.7'" 4.0'"
Total Oiglnatlon.
1
:2
5 8 7
PrIme Jumbo Origln.tions 20M Ful Yelf
~
-"'' ' ' ' ' ' '!..'_____
Ronk
ShM.
Volume
19.0 15.5 14.0
12.5 S4BO.O
..... 3.'" 2.8% 2.6GJJ
M.ricet
~ I 2 3
,•5 7
,• 10
LlOder Wellf;
FlI1Io
Wllhlngton Mutual
CltIMort glge Bank of Nner\c:a CountryMcle ChlSe Home Flnenee SunTnJlt lehm.n Brothel'1 American Homl Mortgage PHH Mortgage TotllOriglnatlonl
Volum.
Sh....
$61.; 45.2 33~g
H .B'*. 13.0% 8.8%
26.0 24.8 24.1
7.5'11. 1.""
.....
10.7
3.1% 3.0% 2.8% 2.6%
10.6 10.0
•.7 $347.0
Source: In.ld. Mortgtg. An.net
100
IP11
~02447809
WaMu Marketshare - Product Subprlme Originations 2006 Full Yea r
Subprlme Onginatlons
2007 Full Year
Market Ra nk
1 2 3 4 5 6 7 8 9 10
Lender HSBC New Century Countrywide CitlMortgage
WMC Mortgage Fremont Investment Ameriques t Optio n One Wells Fargo
First Franklin
Vol um e
Share
$52.8 51.6 40.6 38.0 33.2 32.3
8.3%
8.1% 6.3% 5.9% 5.2% 5.0% 4.6%
29.~
28.8 27.9 27.7 .... ........ .. ...
4.5%
.......
4.4% 4,3%
:;: H~;; ~:: wa~tii,,:gt~ri~ Mutiidl :::::: ::::;";:: :::2&.8::::::::: ::::4"2%:: 12 13 14 15 16 17 18 19 20
GMAC Res Cap Aegis Mortgage American General Accredited Home Lenders BNC Mo rtgage Chase Home Finance Equlfl rst NovaStar • Ownlt Mortgage Total Originations
21 .2 17.0 15.1 15.8 14.5 11.6
10.8 10.2 9,5 $640.0
3.3% 2,7% 2.4% 2.5% 2.3% 1.6% 1.7% 1,6% 1.5%
Ma rket Rank
1 2 3 4 5 6 7 8 9 10
Lender
Volume
CItlM o rtgage
HSBC Countrywide Wells Fargo
First FrBpkUn
Chase Home Finance Option One EMC Mortgage Ameriquest Mortgage
. J3,,!C,M.
