Now you tell us…

images-23.jpegFlipping through the 10-K that Bank United (BKUNA) filed late yesterday, I found myself doing a double-take when I got to this sentence on pg. 49:

Forty-two percent of our one-to four family residential loans were underwritten based on borrower stated income and asset verification and an additional 9% were underwritten with no verification of either borrower income or assets.

Beyond the shocking nature of the numbers, which it’s hard to get past given that over 50% of their residential loans were made on what some of us might call wishful thinking, is the fact that this appears to be the first time that Bank United is actually disclosing this in its public filings. Certainly seems like something that an investor might want to know, say, before the stock began its freefall — declining by more than 70% so far this year. The company goes on to say that “While these loans generally represent more risk than full documentation products we compensate by requiring higher credit scores, lower LTVs, lower-debt-to-income ratios and additional employment/ business information.” Still, I’d imagine it would be a lot easier to fake those sorts of documents, than, say, a W-2, or 1040.

Bank United, as the company notes somewhere else in its filing, is one of the most heavily shorted stocks. That, by the way, is a new disclosure too: it’s the very last risk factor.