WaMu mortgage lawsuit is settled

Washington Mutual has paid roughly $50,000 to settle a lawsuit brought by a Seattle couple who almost lost their home as a result of a series of mistakes WaMu allegedly made servicing their mortgage.

The settlement, finalized in late October, includes a confidentiality clause. But a source familiar with the litigation said that in addition to paying Timothy and Penny Cook the $50,000, WaMu agreed to straighten out credit problems the couple suffered due to the lender's incompetence.

An official with Seattle-based WaMu said she could not comment on the settlement.

"It's important to note that the allegations in that case relate to events that happened nearly two years ago," said WaMu's Libby Hutchinson. "We've certainly acknowledged that we faced some challenges during that time frame, as we integrated a number of mortgage companies in the midst of the largest refinance boom in American history. Having said that, we've worked successfully over the last year to improve processes and service for our mortgage customers."

The Cooks' lawsuit, filed last year in King County Superior Court, said their problems began after WaMu acquired their loan from Fleet Mortgage in summer 2001. The suit accused WaMu of repeatedly losing track of mortgage payments they made on their Seattle condominium.

Even after the couple repeatedly presented copies of canceled checks proving the lender had received payments, WaMu insisted they were behind, according to the suit.

WaMu also told credit agencies the Cooks were delinquent on their payments, which harmed their credit rating, the suit stated. The lawsuit also accused the lender of hiring a company to initiate foreclosure proceedings against them, putting the Cooks and their infant son in imminent danger of losing their home.

In court documents filed before the settlement was reached, WaMu admitted the Cooks supplied copies of canceled checks. But it alleged they sent their payments to the wrong post-office box.

In a November 2002 article, SmartMoney magazine quoted Tim Cook, a network engineer at Microsoft, saying of WaMu, "It was shocking and insulting how they treated us."

Through their Seattle lawyer, David Leen, the Cooks declined comment for this article, citing the settlement's confidentiality clause. Leen, too, was guarded.

"Without commenting on the terms of the settlement, it fully and finally resolved the matter to the complete satisfaction of the Cooks," Leen said.

Last spring, WaMu Chief Executive Kerry Killinger said the customer-service snafus are in the past. He and other WaMu officials have attributed the problems in part to the lender's rapid growth, which involved managing a variety of information systems that are being integrated.

But Leen and other attorneys said they continue to hear from clients experiencing problems much like the Cooks', including a Fox Island woman who last month said she found a foreclosure notice on her door, even though she has been making timely payments to WaMu.

A New Jersey judge could rule as soon as tomorrow whether to confer class-action status in a case against WaMu that alleges violations of the New Jersey Consumer Fraud Act.

It includes claims that WaMu failed to properly service mortgages, falsely sent negative information about borrowers to credit agencies and hounded borrowers for payments already made.

Three months ago, in a separate case in King County Superior Court, WaMu agreed to help fix the account problems of customers who said the lender lost mortgage payments, charged erroneous fees and mishandled payments of property taxes.

In that settlement, with three law firms representing about 1,000 customers, WaMu agreed to hear the individual complaints and review any disputes. WaMu said it would take steps to correct account problems on a case-by-case basis, including refunding fees that were mistakenly charged, according to one of the law firms.