E*Trade Wholesale Lending - Wholesale & Retail

Update - 2008-04-22: A tipster emailed us that E*Trade Bank would be shutting down their remaining retail mortgage lending operation as of midnight 2008-04-21, and today their web site no longer has a link/category for mortgages. This is evident by comparison with a snapshot taken of the site yesterday. "No more originating- until the end of June to Fund," the tipster wrote.

An '800' number for the mortgage division is now answered with a recorded greeting that states "We are no longer accepting mortgage applications." A call to their media relations was not immediately returned. The tipster told us "They have significantly downsized over the past year... outsourced processing and there were about 20 people..."

According to their 2007 10-K Annual Report (ref. pg 53) filed on 2008-02-28, monthly retail origination volume averaged over $216 thousand. Wholesale volume of approximately $1.4 million per month up to the unit's closure on 2007-09-22 was also reported. E*Trade Bank is a wholly owned subsidiary of E*Trade Financial Corp.

Update - 12-04-2007: Per SEC 8-K filing published today, a $250MM revolving credit facility with J.P. Morgan Chase and Morgan Stanley was terminated as of 11-29-07.

The previous day in an article on Forbes.com, acting Chief Executive Officer, R. Jarrett Lilien was quoted saying,

"In the last two weeks E*Trade consumers withdrew $14 billion from the online brokerage, representing about 15% of the total assets there."

Update 11-29-07: CEO Mitch Caplan is forced out in conjunction with a $2.55BLN bailout by hedge fund giant Citadel. Jarrett Lilien, current president and COO, is named acting interim CEO. The following day, Reuters referred to it as a "fire sale," saying E*Trade "got anywhere from 11 cents to 27 cents on the dollar for its $3.1 billion portfolio of asset-backed securities."

Update 11-12-07: Shares of E*Trade Financial Corp. (ETFC) plunged to a 52-wk low on the heels of a press release on 11-09-07 in which the company admitted to investors "the additional deterioration observed since September 30 will likely result in write downs that exceed the previous expectations."

A "Supplemental Portfolio Disclosure" on their Investor Relations page illustrates less than 1% of their $16.9BLN first-lien holdings were subprime mortgages. In addition to retail originations from their banking operation, E*Trade purchased wholesale loans from a formidable list of lenders, including BofA, Countrywide, GMAC, JPMorgan, National City and Wells Fargo.

Update 9-20-07: We have heard some additional information regarding the E*Trade Wholesale closure. Word we've received indicates that they are still sending out rate sheets and will be continuing to accept loans until the 22^nd. Per our source:

The rate sheet email we received today also had an attachment announcing they were accepting new wholesale loans until 9:00 PM on September 22nd. They also confirmed they were getting out of the wholesale business.

Original Post - 2007-09-18: We heard about this a mere one day in advance (rare for us); now it has been confirmed—E-Trade is getting out of wholesale mortgage lending (see the Bloomberg article above). The company is taking a $32 million charge related to severance and restructuring. We are unsure the exact size of the unit effected, but would guess based on this charge that 250-500 employees are involved, at least. We are also unsure of the loan mix the unit processed. If you have any more details, please let us know.