Washington Mutual, the nation's no.1 mortgage lender

TIM AND PENNY COOK HAD settled in for a quiet Friday evening in their Seattle condo with their two-month-old son. "We were new parents, and we were just looking forward to getting some sleep," Tim says of that March night.

Fat chance. Just before dinner they heard a knock at the door. Penny answered, but there was no one there. Strange. Then she spotted a notice tacked to the door. It was from a foreclosure company hired by their mortgage lender, Washington Mutual. Penny snatched it and rushed inside. "It's a notice of default!" she blurted to Tim. "They want to foreclose on our house!"

Tim, a network engineer at Microsoft, was shocked. How could this be? They had never missed a payment. They even had proof: canceled checks showing that Washington Mutual had received and cashed each of their payments before it was due. Still more frustrating, Tim had already faxed those canceled checks to WaMu after late fees had started popping up on the couple's statements. What was going on?

Penny could only imagine the worst. "I was beside myself all weekend," she recalls. "I thought, 'We're going to be kicked out on the street with our little baby.' It was devastating."

The Cooks contacted the bank's foreclosure department, which, in turn, asked the couple to re-fax the seven canceled checks and wait 20 days for it to look into the problem. "Six weeks later," recalls Tim, "they suddenly said they only had three of the checks we faxed, but we were 'welcome' to provide the rest of the documentation."

The Cooks were running out of time. By then it was May, and a notice in a local publication announced that their home was to be auctioned off July 19. Just as frightening, their credit rating was getting hammered. Bank of America froze their home equity line of credit. American Express slashed their charge card limit in half. And with their credit in tatters, the Cooks had to put off plans to buy a car and refinance their mortgage. "We were getting all kinds of solicitations from people who deal with bankruptcy and foreclosures," adds Penny. "It was embarrassing."
By Anne Kadet