Wachovia Mortgage, FSB - Wholesale - Agency, FHA/VA, Jumbo, Alt-A

Update - 2008-09-29: Trading was halted this morning as shares in pre-market dropped over 90% on news of a CitiBank bailout/buyout of it's banking operations. Once again the FDIC forces a deal before a collapse. Citi steps in with an all stock 2.2 billion offer. From an article at CNN.com:

"The FDIC noted that Wachovia did not qualify as a failed bank..."

WHAT!

Update - 2008-07-22: Wachovia acknowledged it is "exiting the General Bank wholesale mortgage origination channel" in a press release today. The company's report mentioned "Approximately 1,000 Wachovia mortgage origination personnel are being redeployed in the company's efforts to assist customers to refinance and restructure Pick-a-Pay mortgages." Wachovia booked a second quarter 2008 net loss of $8.86 billion, and announced it would be reducing its quarterly dividend to five cents per share.

Not in the release but reported elsewhere, including Yahoo!Finance and TheStreet.com, was the human cost:

"Wachovia plans to reduce its headcount by 6,350 employees, or roughly 5% of its workforce. The bank said it has already reduced its mortgage employee headcount by 2,000 through June, and plans to cut 4,400 employees in its mortgage segment over the next year..."

In a memo to employees dated today (view pdf), CEO and President Robert K. Steel notes the 6K+ positions being eliminated are "active", and the 4K+ are "open". "Realigning Wachovia's mortgage business," he called it, intoning more changes would come "in the weeks ahead."

Update - 2008-07-21 (5 pm PDT): No press release as yet, but plenty more information has been flowing in.

The shutdown may not affect the independent subsidiary Vertice based on information we have coming in, but most employees have now received notification of the closure of Wachovia's wholesale. Applications will be accepted through Friday 2008-07-25. An official notice sent to brokers can be viewed here (pdf).

"This decision will be effective July 25, 2008, at 5:00 pm local time which will be the last date on which Wachovia Mortgage will accept new loan registrations from brokers. Additionally, no new locks will be accepted after 8:00 pm EDT, July 25, 2008. Existing rate locks will be honored. If the loan does not close and fund by the lock expiration date, no extensions will be granted. All loans must be received by your Wachovia Servicenter no later than 5:00 pm local time August 25, 2008 and must close no later than end of business September 30, 2008."

We also have this, from an internal notice, emailed to employees this afternoon by David Pope, Head of Mortgage and Retail Credit Employees:

"Based on our decision to focus on building relationship banking customers, we have decided to discontinue doing business through our Wholesale channel after July 25. This will be the final day to accept applications."

No specifics were given in the memo with regard to layoffs, other than a general statement that "there will be displacements throughout the organization as a result..."

Original Posting - 2008-07-21 - 8:30am PDT: We are hearing about the shutdown of wholesale mortgage operations at Wachovia, with a Press Release due out at 1:00pm EDT. This morning, we received the following:

"Wachovia wholesale is shutting down today. Press release at 1PM."

"All us reps were told this morning by top managment that wholesale will be completely shutdown by August 31st and a conference call will be this afternoon. All reps were called Sunday afternoon on the east coast...both Portfolio and marketable products."

The info is coming in from various sources including tipsters, forum members and outside sources - many of whom are (or were) Wachovia employees. We have no detailed information at this point on the number of people who will be affected.

An email sent to brokers by one AE says:

"Good Morning just wanted to let you know that we learned last night that today Wachovia will announce its closing its Wholesale division.

There will be a conference call at 1 pm and I will send out a follow up to that call."

From their web site: "Today's Wachovia was created when First Union Corporation acquired the former Wachovia Corporation and changed its name to Wachovia." That merger occurred in September of 2001; some may also recall First Union's acquisition (and subsequent shutdown) of then-subprime-giant "The Money Store" just a year prior. Many analysts and pundits have pointed to Wachovia's acquisition of Golden West Corporation, parent holding company of World Savings Bank in Oakland, CA in October of 2006 as a cause for recent woes over their $120 billion portfolio of Pay Option ARMs, referred to as "Pick-a-Pay" or "PAP" loans.

Wachovia Corporation will be announcing their second quarter earnings tomorrow, 2008-07-22. From an AP article on Yahoo!Finance:

"Wachovia said it has set aside $4.2 billion pretax to cover bad loans for the quarter, leading to an estimated second-quarter loss of about $2.6 billion to $2.8 billion, or between $1.23 and $1.33 per share, excluding a goodwill write-down."

Contact us with details or any additional information you can provide. See more discussion about Wachovia on our Forum.

More info will be posted as it becomes available.