Washington Mutual - Wholesale - Agency 'A'

Update - 2008-09-17: Washington Mutual Inc. may be the next government-engineered Bear Sterns style "bailout" coming down the pike. CNNMoney reports today that "Wells Fargo & Co., JPMorgan Chase & Co. and HSBC Holdings PLC, among other institutions" have been approached by regulators "reaching out to large banks in an effort to organize a buyout." Shares of WM hit a day low of $2.05 at 12:04 pm (EDT) before rebounding slightly in afternoon trading.

Update - 2008-09-08: CNBC reports that CEO and former Board Chairman Kerry Killinger was fired over the weekend, replaced by Alan Fishman, chairman of mortgage broker Meridian Capital Group. Washington Mutual said it has entered into a "Memorandum of Understanding" with the Office of Thrift Supervision "meaning it is now effectively on probation" as The Wall Street Journal puts it. The M.O.U. "requires it to improve its risk management and compliance." From Option ARMeggedon:

"Remember, WaMu has about $120 billion worth of toxic mortgage assets sitting on its balance sheet. Subprime, Option ARMs, Home Equity Loans, etc. Taken together, these securities are likely worth 50 cents on the dollar. It's not easy deciphering their balance sheet, but WaMu probably has in the neighborhood of $40 billion of capital backstopping these losses. So if they actually write down their assets to reflect their current value, it could wipe them out."

The CNBC article notes $7.2 billion was raised from TPG.

Original Listing - 2008-04-07: In a conference call today, Washington Mutual told its employees that "wholesale was done." It appears there may have been some conditions attached to that $5 billion (from TPG and others).

This is also expected to be a full retreat back to the bank footprint for Retail Lending. The 'official' announcement sent out 4 hours after we posted news on the demise of Wamu Wholesale, was oddly enough entitled "You heard it here First."

A poster on our Forum had this:

"Just received an email from my corporate office. The following is an email they received from our Rep...."

"Dear Brokers:

Hey I wanted to let my friends know that I just heard WaMu is exiting the Wholesale lending business! The last day to submit a file electronically to us is 4-10-08 and we'll be around to close out the remaining pipeline.

I'll let you know more when I have more information, but suffice to say it's been a pleasure working with you these last 15 years!"

Actually, we understand the call said the last date for fundings was June 30th. From another email:

"Today, employees across the country were notified that all of the loan fulfillment centers (processing) except Downers Grove, IL are closing. All processing, underwriting, closing, and funding staff are gone effective August 31. In addition, all home loan centers are closing and those teams are being laid off as well. The only residential lending salespeople being retained are those who were located in retail branches... I'd be willing to bet that a sizable portion of the IT side of the house as well as other back office functions are going to see impacts, too."

It is our understanding Jacksonville will also remain open. More from the tip line:

"Today WaMu Corporate announced that unfortunately they will be closing down WaMu Wholesale. All new incoming applications but be submitted by no later than Wednesday April 9th and all current files in the pipeline will be closed accordingly. More details on the announcement are to follow. Please refer to www.wamubroker.com for any additional details as well.

We would like to take this opportunity and thank you for all your support and business through the years as it was a pleasure working with you and serving you as our Premiere Mortgage Brokers."

Back in December we said the wholesale channel was expendable... it appears we were correct. View and participate in our most recent Forum topic for this company here, or contact us if you can provide additional details.

Original Ailing Post Update - 2008-03-07: In an article entitled "Washington Mutual melting down" CnnMoney.com is reporting:

"Washington Mutual (WM) hit a 12-year low Friday as the meltdown of the mortgage sector accelerates. Shares in the Seattle-based lender plunged 15% to $10 apiece after The Wall Street Journal reported that WaMu, under pressure from regulators, has approached private equity and sovereign wealth investors for possible capital infusions."

Update - 2008-01-18:

"With its top rival swallowed up at fire sale prices, its mortgage business in turmoil and legal clouds gathering..."

Those are the opening words in an article by CNNmoney published today. Perhaps they read the opening line of our original Ailing/Watch List post. In another quote from the same article:

"WaMu went further down the subprime rabbit hole than most banks, with analysts estimating it has the highest default exposure of any of the nation's top five lenders. It is a problem that is now coming home to roost."

The above is a valuable piece of reading... we have suggested for months a Chase buyout and it's gaining consensus, but there's still New York State Attorney General Andrew Cuomo in the way.

Original Ailing Post - 2008-01-14: Are we going to see yet another fire sale buyout in the near future? On the heels of news confirming the Countrywide buyout, CNBC and Reuters announced that J.P. Morgan Chase and WAMU "have held preliminary talks" of a merger. With their stock trading now near its 52-week low, this does indeed look like a possibility. In an SEC 8-K filing on 1/07/08, WAMU changed its compensatory agreements with certain top executives with specific regard to "change-in-control" agreements, stipulating their pay if they were to leave or if the bank were to be sold.

WAMU has had its fair share of troubles of late. While citing full cooperation with the ongoing SEC investigation into the handling and reporting of mortgages "that may have been based on inflated home appraisals," the bank continues to see large writedowns and is struggling to attract additional capital. On 12/11/07, the company announced a $90 million restructuring charge, and anticipated the changes would be completed by March 31st of 2008.

"The company said that due to "a fundamental shift in the home mortgage market due to credit dislocation and a prolonged period of reduced capital markets liquidity," it would discontinue lending through its subprime mortgage business. It also said it would close its home loan centers, WaMu Capital Corp, its institutional broker-dealer business, as well as its mortgage broker finance warehouse lending operation."

The SEC investigation is an extension of lawsuits filed by both NY's AG and a law firm representing shareholders filed back in November 2007.

WAMU shares took a huge hit after they reported larger than forecast losses for the 3rd Quarter of 2007. Nerves are so tight that even your Escrow company has to be on their 'Approved' list.

We encourage you to explore our Forum on this topic.