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Washington Mutual made the decision yesterday to shut down operation of it’s wholesale lending arm as well as close the doors on all of its standalone home loan centers according to a WAMU spokeswoman1.
WAMU and the Subprime Market
WAMU made what now seems like a pretty bad decision several years ago to enter the subprime mortgage market. The 119-year old company is really feeling the squeeze now as a result of that decision and so are it’s share holders, who have lost 79% of the value of their investment in the company.
Capital Injection
WAMU also announced yesterday that it would close a deal to accept a $7 billion dollar capital injection investment from Private Equity Firm, TGP; which, although it could serve to give WAMU the boost it needs, may further dilute shareholder’s value in the company.
Although it isn’t immediately clear when the standalone mortgage centers will be closing, an internal memo obtained by Businessweek puts the limit for brokered mortgage transactions at June 13. There’s a rumor over at the Mortgage Lender Implode-O-Meter that shutting down wholesale operations was a condition of the TGP investment, although we’ve been unable to confirm that.
Retail Operations
WAMU plans to continue it’s retail home loan operation within the doors of it’s banking center locations. WAMU opened doors all the way back in 1889 and entered the home loan business only a year later. WAMU has grown exponentially since then, becoming the second largest home loan lender in the United States, after Countrywide. In 1999, WAMU acquired subprime mortgage company, Long Beach Mortgage, which unwittingly exposed WAMU to the brunt of the mortgage crisis that would arrive less than a decade later.
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