Subprime Friday…

images.jpegLate Friday, three of the biggest names impacted by the subprime mess filed their 10Ks, which we’re sure was just coincidental: Washington Mutual (WM) filed at 4:30, IndyMac (IMB) filed at 4:57 and Countrywide (CFC) filed at 5:04. Words like turmoil, unprecedented, and distressed are sprinkled liberally throughout all three filings.

Dow Jones has some highlights from the Countrywide filing. But the part of the filing we found particularly interesting are all the regulatory solutions that are being proposed — from the Fed to Congress to local municipalities. In the filing, Countrywide says that it can’t “reasonably predict” which of these various resolutions, which the filing describes as “federal and state proposals that could impose new loan disclosure requirements; restrict or prohibit certain loan terms, fees and charges such as prepayment penalties; may require borrower counseling; and increase penalties for non-compliance” will pass. But it’s always nice to know that regulators and the government are on the ball.

In the WaMu filing, it quickly becomes clear that just about everyone — from New York’s Attorney General shareholders and even the company’s own employees, who have filed a complaint under ERISA claiming that, among other things, WaMu’s managers “continued to offer Company stock as an investment option in the plan despite that they knew or should have known that the stock no longer was a suitable and appropriate investment for the Plan” — are suing the Seattle-based company. We also liked this new disclosure about the loan portfolio: “Given the lack of liquidity in the secondary mortgage market at December 31, 2007, significant management judgment was necessary to estimate the fair value of loans held in portfolio.” Now call us crazy, but given the current situation and the lack of judgment shown heretofore, this seems a bit too creative.

Over at IndyMac, it wasn’t much better. With the exception of loan servicing and the company’s Financial Freedom reverse mortgage program “all of our operating segments reported material losses in 2007”, though the company says it expects to rebound in 2008 by focusing most of its attention on selling loans to Fannie and Freddie, instead of Wall Street. The company also seems to be taking a bit more serious approach to evaluating its bad loans, especially when compared to WaMu’s description: “We use a proprietary loss estimation model to project credit losses. This model was developed utilizing our actual loss experience for prime and subprime loans.” Sounds a bit more scientific than management judgment.