Long Beach Mortgage Review

Long Beach Mortgage, a subsidiary of Washington Mutual or Wamu’s, was one of Wamu’s most active subprime mortgage lenders, writing mortgages for people with poor credit, high debt-to-income ratios, and other financial issues that made getting a mortgage difficult.

Long Beach operated mostly in the secondary market: that is, it wrote the loans then immediately sold them to other financial institutions while retaining the servicing rights.

Fitch recently downgraded the ratings 317.7 MM of Long Beach Mortgage holdings. Wamu has been struggling with sub-prime mortgage debt in recent months and only very recently was able to raise $7 billion in equity from various investors to shore up its sagging bottom line. That said, while Long Beach Mortgage still exists in theory at this writing, anyone seriously thinking of trying to get a mortgage through the company would be well-advised to shop around or wait the current crisis out.

Long Beach Mortgage is currently listed at #151 on the popular Mortgage Lender Implode-O-Meter at http://ml-implode.com/, a site which lists over 250 mortgage lending institutions that have imploded since 2006, and keeps many more on a watch list.

John Ngo, a 27 year old Senior Loan Coordinator with Long Beach Mortgage recently pled guilty to mortgage fraud in United States District court as part of an ongoing investigation into fraudulent activities perpetrated by sub-prime lending institutions and their representative.

Ngo received over $100,000 in bank transfers into his personal bank account from a single mortgage broker for ensuring that Long Beach Mortgage would underwrite loans referred to Long Beach by that specific broker. Ngo at first denied this allegation then confessed to the charges once documents were presented proving that Ngo had accepted the kick-backs, which are illegal. Ngo also pleaded guilty to creating false documentation to back up the loans, as well as inserting false information into the applications to make sure the mortgages were approved.

Long Beach Mortgage is not unique in engaging in these practices to get shaky loans underwritten and then selling the shaky loans to other lending and investment banks and financial institutions. However, in getting caught at it, its efficacy as a sub-prime lender was badly compromised.

In addition to the charges against Ngo, Long Beach Mortgage is also the target of a discriminatory lending practices lawsuit filed in California Federal District Court. The company allowed its loan officers and outside brokers to charge as much as 12 points about the base price of the loan at their individual discretion. The fees and interest rates on their loans were already significantly higher than on conventional mortgage loans due to the credit history of the applicants. By allowing individuals who were set up to directly profit from charging points above the base subprime rate Long Beach Mortgage had already established, it created an environment ripe for predatory lending.

The discriminatory lending practice lawsuit alleges that Long Beach Mortgage loan officers and outside mortgage brokers charged points and origination fees well over what was required for clients who were African American, Latino, women, and over the age of 55, and they did this without regard to their clients’ ability to actually pay back the loan.

Such practices are against federal law and the charges are extremely harmful to the reputation of any lender. To date the company has not been able to defend itself against the charges, and has instead settled in a variety of fraud cases. For all practical purposes, it is not currently much of an asset to its parent company Wamu, a company beset by its own subprime lending problems for the past six to eight months.