WaMu Closing Wholesale Mortgage Lending, Scaling Back Retail
Submitted by
CalculatedRisk on Mon, 04/07/2008 - 4:35pm (53 comments)
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Broker Universe appears to confirm.
It's just so surprising!
Who in the world could have seen this coming?!
I feel like Obi Wan at the moment of the destruction of Alderaan.
Something big just happened here, but I'm not sure exactly what.
OMG, you mean, they're going to become just like a real bank? I'm shocked, shocked! I thought that was so last century.
WaMu is going back to the Joy of Banking. (Whoo-hoo!)
Does anyone have numbers on how many loans they were actually doing recently? Is this going to make a dent in current mortgage availability?
It's like quitting smoking, after you get cancer.
Sounds like higher unemployment figures for mortgage brokers. Hope mfg. is ramping up enough to counter.
Brokers are going the way of the dinosaur. I'm sure the realtors are just as sad. Think about all those illegal kickbacks from client referrals they'll be missing out on on.
What a shame. Two industries full of ethical, educated, honest, hardworking individuals.
Oh how blissfully close to bankruptcy they were....sigh....
The issue why this will hurt when WAMU goes away is the types of loans they had available because they were a portfolio lender.
They were heavy into stated income and "Pick-A-Payment" (their name for option arm) loans.
The world has shrunk dramatically for anything other than Agency and FHA loans. Agency is tightening and getting more expensive and FHA is merely insurance and lenders are putting overlays on top of what FHA requires so that they have performing loans that they can readily sell to the secondary market.
"Hope mfg. is ramping up enough to counter."
lots more flying duck windmills will be coming out of garage workshops now, i wager
OMG, you mean, they're going to become just like a real bank? I'm shocked, shocked! I thought that was so last century.
$5 billion used to buy a whole lotta toasters back in the day.
Lots more flying duck windmills will be coming out of garage workshops now, i wager
But they'll have to start with the big-assed-bent-over-woman cut-outs first... fewer moving parts (easier).
I can hardly wait for another cheap carving set from my credit union.
I will wait until they pay a decent interest rate, though. Like 10%.
Someday this war's gonna end...
Dryfly
I'm waiting for the day they give away a house with my New Saving account. That is if I have any money for the account.
jo6pac
If WAMU is in fact dumping the wholesale channel, it will not come as a big surprise to many of us in the business, as wamu has been cutting back on the products (like jumbo loans) that is offered through brokers anyway.
BA had quit this channel in Dec 07, and checking their rates online it appears their rates are higher, not lower...as any thinking person would expect: Less competition, higher rates & profit margins.
Mortgage brokers, doing their job, shop the markets for competitive rates and mortgage programs. I may quote a dozen or more scenarios in a week and it's not about looking at a piece of paper with the rate on it, to know if that person is likely to qualify for the quote I give. esp nowadays, it's a very time-consuming process to quote other than a plain-vanilla agency loan.
So, to those ignoramoses gleeful about the mortgage broker channel of distribution disappearing...careful what you wish for!
Lots more flying duck windmills will be coming out of garage workshops now, i wager
But they'll have to start with the big-assed-bent-over-woman cut-outs first... fewer moving parts (easier).
Now I know where the rebate checks are going.
Hrm...
HAHAHAHAHA
I opened up this page tonight and thought it said walmart closing...
Too bad!
I was on another train of thought which just arrived earlier, i.e, the one where The HomeOwnerShip Society is linked and connected like the tracks of a train -- which connect to the service economy, which is linked at the roundhouse of opportunity to new home loans for low income people who will be subsidized by The Fed, FHA and all those housing authorities that are smoking pot pot with Franks on the hill. As John Lennon said, "I'll say it again" (in case you missed the first verse) what if the homeownership societies next phase is to morph the foreclosure society into a new economic boom of prosperity fueled by the synthetic connection between first time homeowners (that are low income earners in the service community) to a BG pile of Federal Cash, which is the same pile of cash that was just exchanged by bear Stearns.
Ok, maybe I need dinner...
I sensed a disturbance in the force . . . As if a million voices had cried out at once.
Only, those voices came from investors demanding bad mortgages be bought back from their tranches 'o crap.
scotty @ the bong becomes scotty @ the wall of hunger.
Duuuuuuude!
Marcus,
The bong thing was just for Franks..I'm just part of a sub-plot; I'm innocent!
I don't want to be rude ... but what about layoffs?
Layoffs get in the way of my service economy boom plan, just as The Iraq War also does, but I see these as positive challenges which NAR and I can solve.
We know service workers will need to serve the upper crust classes, so al we need to do is link the projected cash flow to the liquidity of the fatcats; however, we still need to work on that war and make sure these service people stay in these foreclosed homes longer than the previous generation of HomeOwnerShip Society beneficiaries. Iraq...?
I don't want to be rude ... but what about layoffs?
REBear | 04.07.08 - 10:02 pm | #
I don't want to be rude, but how do we know that money actually changed hands?
It's a PE right ?
Layoffs, yes tell us about layoffs. We've got that 8 percent hurdle of CR's to crack... teachers in California are doing their jobs... 20,000 sent pink slips on March 14... where is WaMu's effort? Come on, suck it up... give till it hurts!
Ok, this is the latest best crap I have;
US Census Bureau: Prepared Statement Of Steve H. Murdock Director U.S. Census Bureau
Friday, April 04, 2008; Posted: 06:54 AM
http://www.tradingmarkets.com/.site/news/Stock%20News/1308340/
One of the Census Bureaus important goals for FY 2009 is the expansion and improved measurement of the services sector.
The FY 2009 budget request again includes an $8.1 million initiative to provide quarterly and annual coverage of all twelve service sectors. The service economy accounts for 55 percent of national economic activity, but currently our quarterly surveys cover only 17 percent and our annual surveys cover only 30 percent of GDP. When this multi-year expansion is completed, both quarterly and annual coverage of service industries will match the coverage of the Economic Census conducted every five years. The Economic Census, of course, will still provide a more comprehensive and detailed assessment than the quarterly and annual estimates.
There is a new mini strip center going up on the corner (newer part of Corona, CA) and I kept watching to see who the tenants were going to be....signs just went up, a Wallgreens and WaMu!!! I just laughed, right across the street from a big BoA and huge grocery store and up the street from SaVon's. Wonder how long they will be in there before they leave....
Ok, step back, relax and think:
Never mind, next topic...
as the billboards say (and el cliffo) woo hoo!
Kerry Killinger has to go - the mis-management at WaMu is becoming legendary.
the message thread on the ml-implode forum also indicates that any retail loan center outside of the wamu bank footprint will be closed by June 30th. All retail LOs will be housed at the bank branches.
This is an interesting development. I wonder where they're going to put the processors and underwriters?
This is an interesting development. I wonder where they're going to put the processors and underwriters?
They got underwriters?
WaMu's portfolio doesn't change does it?
From HousingWire: The banks portfolio includes $57 billion in option ARM mortgages; so-called negative amortization loans have been a fast-increasing source of losses for lenders as housing prices have fallen in key markets throughout the United States and put millions of borrowers in the position of owing more on their mortgage than their home is worth.
From the WSJ article: Still, an agreement has yet to be finalized, and the talks could fall apart.
Hey CR!!!!
Seeing as the recession that never existed has just hit bottom, and everyone and their mother has decided to go long, could you post the cliff diving charts so we can see how much a bounce off the concrete-like water we managed to get? thx
This is great news! Now they can concentrate on their core competency. getting that laser focus back.
energyecon, WaMu needs that deal (or some other cash infusion). I was talking with a fairly senior Wall Street banker a couple of weeks ago, and he thought I was crazy when I mentioned WaMu (along with DSL and some others) as examples of banks that could be in real trouble.
Best Wishes.
"to those ignoramoses gleeful about the mortgage broker channel of distribution disappearing...careful what you wish for!"
Cry me a river.
I knew the jig was up last week when my daughter's husband (ISIL...idiot-son-in-law) changed careers from mortgage broker to used car salesman while launching a bid for a city council seat and beginning night classes to get his stock broker's license.
I didn't say he wasn't ambitious, he's just an idiot.
We are readying the spare bedroom for daughter.
CR - do you think that "senior Wall Street banker" was putting on a front for you? Maybe just in serious denial? Stupid beyond belief? What?
I would seriously appreciate it if you would characterize your opinion of that reaction.
It is really hard to understand how a little ol layperson (me) can make dozens of predictions that turn out 100% accurate over the last several years (I am getting a reputation for prescience in my circle of friends and acquaintances.) while all these "wise men" have been so consistently wrong.
I KNOW that I am woefully ignorant about matters economic. These guys are not. Are they complete idiots?
WSJ: "Still an agreement has yet to be finalized..."
Do you think the investors might be objecting to mortgage losses being excluded from computation of management bonus calculations?
UnEasyOne, he knew there were problems (obviously), but I was talking serious problems - and he thought the problems were overblown. I'd say he was in denial.
Best Wishes.
so much attention on too big to fail and so little on too small to matter. last fall, countrywide was supposed to be to big to fail, last month, it was bear stearns. Are we now moving past the end of the beginning, and going to start testing who is too small to matter. I'd guess big regionals like National City and WAMU are front and center. If I were running the triage in Washington, I'd be inclined to let one of them go and see what happens. More likely that it would be a useful data point than the beginning of the end.
On another note, I've got to admire the Thornburg people, who are doing their best to deal with something beyond their comprehension, and without much help for anybody. As I understand the most recent financing, they've diluted the existing shareholders to the tune of 95%, which is basically a Bear Stearns outcome for those folks, without any help from the feds at all.
Can you do the math and back out the $5B loan (for the ratio):
Standard & Poors Equity Research reaffirmed its hold rating on the stock, but said that despite the dilutive effect it would have, the potential capital injection is positive for the bank, given its fourth-quarter Tier-1 capital ratio of 8.30%, which was below its peers. However, with WaMus loss allowance at only 42% of nonperforming loans, S&P said it expects additions to loss provisions in the quarters ahead to be significant. (S&P, like Businessweek, is a unit of McGraw-Hill Companies (MHP).)
UBS plans to sell a Tier 1 euro perpetual benchmark that is expected to reap strong demand thanks to its relatively cheap pricing.
The Merrill Lynch euro sub-debt Tier 1 index shows that spreads now average 412 basis points over mid-swaps, up from just 75 basis points a year ago.
Morgan Stanley, the second-largest securities firm, raised $5 billion in December by issuing convertible securities to China Investment Corp., at the same time it announced its first-ever quarterly loss.
Tier 1 Capital
Regulators will force investment banks to set aside more capital, ``resulting in reduced profitability,'' wrote Bill Gross, chief investment officer of Newport Beach, California- based Pacific Investment Management Co., the biggest U.S. manager of bond funds, on his Web site last week.
One way to gauge asset risks is by monitoring Tier 1 capital, a ratio commonly reported by commercial banks. ``We are very comfortable with our Tier 1 ratio,'' said Goldman spokesman Lucas van Praag, who declined to elaborate.
Reviewing Methodology
Morgan Stanley spokeswoman Jeanmarie McFadden also declined to provide the bank's Tier 1 capital ratio, saying her firm was ``comfortably capitalized.''
The U.S. Securities and Exchange Commission has discouraged investment banks from reporting those numbers until regulators fine-tune the methodology for calculating the ratio.
Not all the firms are impacted the same way'' by leverage, said Fitch's Fahey. Goldman and New York-based JPMorgan Chase & Co., the third-biggest bank by assets, avoided piling up mortgage-backed securities on their balance sheets, andthey actually have more flexibility than others at the moment,'' she said.
The risk-based capital standard requires federal savings institutions to
maintain Tier 1 (core) and total capital (which is defined as core capital and
supplementary capital) to risk-weighted assets of at least 4% and 8%,
respectively. In determining the amount of risk-weighted assets, all assets,
including certain off-balance sheet assets, recourse obligations, residual
interests and direct credit substitutes, are multiplied by a risk-weight factor
of 0% to 100%, assigned by the Office of Thrift Supervision capital regulation
based on the risks believed inherent in the type of asset. Core (Tier 1) capital
is defined as common stockholders' equity (including retained earnings), certain
noncumulative perpetual preferred stock and related surplus and minority
interests in equity accounts of consolidated subsidiaries, less intangibles
other than certain mortgage servicing rights and credit card relationships. The
components of supplementary capital currently include cumulative preferred
stock, long-term perpetual preferred stock, mandatory convertible securities,
subordinated debt and intermediate preferred stock, the allowance for loan and
lease losses limited to a maximum of 1.25% of risk-weighted assets and up to 45%
of unrealized gains on available-for-sale equity securities with readily
determinable fair market values. Overall, the amount of supplementary capital
included as part of total capital cannot exceed 100% of core capital.
The Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System (Board), the Federal Deposit Insurance Corporation (FDIC), and the Office of Thrift Supervision (OTS) (collectively, the agencies) are changing their regulatory capital standards to address the treatment of recourse obligations, residual interests and direct credit substitutes that expose banks, bank holding companies, and thrifts (collectively, banking organizations) primarily to credit risk. The final rule treats recourse obligations and direct credit substitutes more consistently than the agencies' current risk-based capital standards and adds new standards for the treatment of residual interests, including a concentration limit for credit-enhancing interest-only strips. In addition, the agencies use credit ratings and certain alternative approaches to match the risk-based capital requirement more closely to a banking organization's relative risk of loss for certain positions in asset securitizations. The final rule does not include the proposed requirement that the sponsor of a revolving credit securitization that involves an early amortization feature hold capital against the amount of assets under management.
This whole thing is retarded!
Re: Financial guarantees are contracts that require the issuer to make
specified payments to reimburse the holder for a loss incurred because a
specified debtor fails to make payment when due in accordance with the
original or modified terms of a debt instrument. The amounts in the above
table are nominal principal amounts.
^^ Standby letters of credit which are financial guarantee contracts are
irrevocable obligations on the part of the group to pay third parties when
customers fail to make payments when due.
^^^ Other direct credit substitutes include re-insurance letters of credit and
trade-related letters of credit issued without provision for the issuing
entity to retain title to the underlying shipment.
^^^^ Performance bonds, bid bonds, standby letters of credit and other
transaction-related guarantees are undertakings by which the obligation on
the group to make payment depends on the outcome of a future event.
The amounts disclosed in the above table reflect the group's maximum exposure
under a large number of individual guarantee undertakings. The risks and
exposures from guarantees are captured and managed in accordance with HSBC's
overall credit risk management policies and procedures. Approximately half of
the above guarantees have a term of less than one year. Guarantees with terms of
more than one year are subject to HSBC's annual credit review process.
WaMu had some layoffs a few weeks ago, which caught up my neighbor, who is now looking hard for new work. This neighbor used to work for a mortgage company before WaMu....talk about frying pans and fire.
Prediction: this is only the first of several major banks that are going to make this move.
In the general case it is a move to take back the business; in this particular case there may be real fire behind all the smoke - but time will tell.
Ugly, ugly terms for WM.
175m shares at 8.75. That would be just under 25% dilution.
Yield on the preferred is 19%? Can that be right?
Nope, my bad, the whole thing is a convert. The convert is priced at 8.75 and yields 19%.
Sounds like a death spiral to me.