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Banks to earn billions from bad-loan accounting

May 26th, 2009, 7:02 am by Mathew Padilla

Bloomberg reports:

JPMorgan Chase & Co. stands to reap a $29 billion windfall thanks to an accounting rule that lets the second-biggest U.S. bank transform bad loans it purchased from Washington Mutual Inc. into income.

Wells Fargo & Co., Bank of America Corp. and PNC Financial Services Group Inc. are also poised to benefit from taking over home lenders Wachovia Corp., Countrywide Financial Corp. and National City Corp., regulatory filings show. The deals provide a combined $56 billion in so-called accretable yield, the difference between the value of the loans on the banks’ balance sheets and the cash flow they’re expected to produce.

Faced with the highest U.S. unemployment in 25 years and a surging foreclosure rate, the lenders are seizing on a four- year-old rule aimed at standardizing how they book acquired loans that have deteriorated in credit quality. By applying the measure to mortgages and commercial loans that lost value during the worst financial crisis since the Great Depression, the banks will wring revenue from the wreckage, said Robert Willens, a former Lehman Brothers Holdings Inc. executive who runs a tax and accounting consulting firm in New York.

“It will benefit these guys dramatically,” Willens said. “There’s a great chance they’ll be able to record very substantial gains going forward.”

When JPMorgan bought WaMu out of receivership last September for $1.9 billion, the New York-based bank used purchase accounting, which allows it to record impaired loans at fair value, marking down $118.2 billion of assets by 25 percent. Now, as borrowers pay their debts, the bank says it may gain $29.1 billion over the life of the loans in pretax income before taxes and expenses.

The Bloomberg story explains the purchase-accounting rule, known as Statement of Position 03-3, provides banks with an incentive to mark down loans they acquire as aggressively as possible.

Thomas Kelly, a spokesman for JPMorgan, said, “We marked the portfolio based on a number of factors, including housing-price judgment at the time. The accretion is driven by prevailing interest rates.”

In other news…

Posted in: Bad debt • Bailout Buzz • Bank failures • Bank woes • Chase • Company Watch • Washington Mutual | Post a Comment »

2006: State’s most toxic year for home loans

April 22nd, 2009, 2:21 pm by Jeff Collins

foreclosure-artSome defunct Orange County lenders accounted for the highest proportion of bad loans generated during one of the most notorius periods for bad-loan originations, DataQuick reported today.

In its latest report on defaults and foreclosures, the real estate data firm noted that the highest percentage of defaults occurred from August through November 2006 — a period DataQuick called “a particularly toxic period” for issuing home loans.

Nine percent of the loans issued during that period ended up in default, DataQuick said. Then, it added:

“The lending institutions with the highest default rates for loans originated in August to November 2006 include ResMAE Mortgage (69.9 percent of loans resulting in a default notice), Master Financial (64.6 percent) and Ownit Mortgage Solutions (63.6 percent).”

All three were Orange County subprime lenders before they bit the dust.

Other lenders’ default rates for loans originated in this period: IndyMac, 18.9 percent; World Savings, 8 percent; Countrywide, 7.7 percent; Washington Mutual, 6.3 percent; Wells Fargo, 3.4 percent; and Citibank and Bank of America, less than 1 percent apiece.

In addition, DataQuick reported:

  • Of the 3.7 million home loans made in 2004, less than 1 percent have since resulted in a lender filing a default notice.
  • Of the 3.7 million loans originated in 2005, 4.9 percent have triggered a default notice so far.
  • Of the 3 million in 2006, 8.5 percent have so far resulted in default.
  • Of the 2.1 million loans made in 2007, it’s 4.6 percent – “a percentage that’s likelyto rise significantly during the rest of this year.”

DataQuick said the figures suggest that 2006 was “a period where underwriting criteria were particularly lax.” It quoted company President John Walsh as saying:

“The nastiest batch of California home loans appears to have been made in mid- to late 2006, and the foreclosure process is working its way through those. Back then, different risk factors were getting piled on top of each other. Adjustable-rate mortgages can be good loans. So can low-down-payment loans, interest-only loans, stated-income loans, etc. But if you combine these elements into one loan, it’s toxic.”

The figures were part of a DataQuick news release reporting that both California and Orange County recorded a record number of default notices during the first three months of this year.

Statewide, 135,431 default notices were issued during the January-to-March period; O.C. accounted for 8,427 of those. Both figures were up 19 percent from the year before. For more on O.C. foreclosure and default figures in March, CLICK HERE!

To read the Register’s award-winning analysis of subprime lending, CLICK HERE!

Read more …

Posted in: Bad debt • Bank failures • Bank of America • Citigroup • Countrywide • Defaults & Foreclosures • IndyMac • Loan underwriting • Washington Mutual • dataquick • • • • • • • • • • • • • | 4 Comments »

Chase swaps all signs of Washington Mutual

March 30th, 2009, 3:00 am by Mathew Padilla

JPMorgan Chase today is expected to replace Washington Mutual signs with Chase signs at all 708 branches it acquired in California after the thrift failed last year.

Chase said it’s investing $375 million in California in 2009 to refurbish and rebrand existing branches as well as open 20 new ones.

About a week or two ago, the Register’s Fast Food Maven blogger Nancy Luna spotted what looked like a Chase sign covering a WaMu sign in Orange and took the photo shown here.

The latest banking/lending stories …

Posted in: Chase • Company Watch • Washington Mutual | 6 Comments »

Washington Mutual sues FDIC for $13 billion

March 21st, 2009, 4:36 pm by Mathew Padilla

Reuters said Washington Mutual, the part that’s still independent, has sued the Federal Deposit Insurance Corp. for more than $13 billion over how the agency handled the seizure of WaMu’s banking operations, which were sold to JPMorgan Chase. Here’s more:

In a complaint filed with the U.S. District Court for the District of Columbia, the thrift’s former parent accused the FDIC of having on January 23 made a “cryptic disallowance” of its claims, prompting the lawsuit.

It also accused the FDIC of agreeing to an unreasonably low price in arranging the a $1.9 billion sale of the banking business to JPMorgan on September 25, when regulators seized Washington Mutual and appointed the FDIC as receiver.

You can read the story HERE, but the lawsuit strikes me as a long shot. A spokesman with the FDIC declined to comment to Reuters.

Posted in: Bank failures • Company Watch • Washington Mutual | 3 Comments »

Chase opens O.C. center for mortgage help

March 5th, 2009, 3:00 am by Mathew Padilla

JPMorgan Chase on Wednesday opened a mortgage aid center in Santa Ana, which has the highest concentration of foreclosures in the county.

From an office on Main Street, the center has seven employees available to meet with mortgage customers of Chase, Washington Mutual or EMC Mortgage, said spokesman Gary Kishner. The goal: Avoid foreclosure.

Kishner said Chase has not estimated how many people the center will help.

Chase plans to open 24 centers nationwide. The Santa Ana office is the second in California and third in the U.S.

Separately, JPMorgan expressed support for details of the Obama administration’s mortgage assistance program announced Wednesday. In its statement JPMorgan said:

We support the program because:

  • The guidelines establish a clear, fair and consistent set of standards for all servicers to follow.
  • It is intended for the right borrowers: those with mortgages below $729,750.
  • All borrowers must fully document their income.
  • All borrowers must clearly demonstrate financial hardship.
  • It covers verified owner-occupied homes only.

In the release, CEO Jamie Dimon simultaneously praised the program and bashed the proposal in Congress to empower bankruptcy judges to modify home loans, such as by reducing what people owe to market value of their property.

“This program maintains the essential principle that individuals, businesses and corporations should pay their loans if they can afford to do so. We believe this program’s completeness eliminates the need for judicial modification in bankruptcy, but if legislated, judicial modifications should be consistent with this plan and only for borrowers who couldn’t qualify or were not offered a modification. Extraordinary times need extraordinary measures. It is time to implement this program – even if it’s not perfect in everyone’s view – and move on.”

In other news…

Posted in: Chase • Defaults & Foreclosures • Washington Mutual | 8 Comments »

Chase halts home lending via brokers; could lay off 100

January 13th, 2009, 2:36 pm by Mathew Padilla

Chase, a unit of JPMorgan Chase, said today it’s closing its unit that makes home loans via mortgage brokers and will instead focus entirely on its retail branches, including 2,200 it picked up by acquiring the assets of failed Washington Mutual.

The change jeopardizes more than 100 jobs at Chase’s Orange office. That office is one of four nationwide operations centers tied to brokers, said company spokesman Tom Kelly said.

Considering the “boom” in mortgage refinancing amid low interest rates, Chase may need some of those Orange workers familiar with underwriting and processing loans to work on the retail side of the business, Kelly said. But some workers will likely be let go, Kelly said.

Kelly said the acquisition of Washington Mutual accelerated Chase’s growth in retail branches. Five years ago it had some 600 branches and now has 5,000.

Chase issued a release that suggests loans via brokers are more likely to become delinquent (emphasis added):

“We believe that our customers are best served when a mortgage officer works directly with them, explains our products clearly and then helps them carefully evaluate the choices in light of their personal financial situation.

Homeowners with loans originated by Chase professionals and other retail-focused teams have historically performed better than those originated by brokers.“

In any case, the move is a blow to brokers. National Mortgage News reports Chase was the largest wholesale lender in the country in the third quarter of last year.

Washington Mutual was the No. 7 wholesaler, but earlier in the year, WaMu also said it would stop using brokers.

Here’s the top ten wholesales, according to National Mortgage News. (Dollars in millions and refer to total loan volume.)

Rank Lender Q3 08 Vs. 07 Mrkt Share
1 Chase $5,965 -49% 7.58%
2 Wells Fargo $5,907 -35% 7.51%
3 Taylor, Bean & Whitaker $5,370 -31% 6.82%
4 AmTrust Bank $4,352 3% 5.53%
5 CitiMortgage $4,234 -68% 5.38%
6 Bank of America $3,811 -54% 4.84%
7 Washington Mutual $3,800 -72% 4.83%
8 ING Bank $2,981 -1% 3.79%
9 Flagstar Bank $2,812 -12% 3.57%
10 U.S. Bank Home Mortgage $2,712 13% 3.45%

And in other news…

Have you lost your job? Check out our new blog: Handling Hard Times

Posted in: Chase • Company Watch • Washington Mutual | 18 Comments »

The regulator did it

December 6th, 2008, 3:00 am by Mathew Padilla

The Washington Post, in a recent story, wrote that when Countrywide Financial felt pressured by a federal agency charged with overseeing it, executives simply switched to a more business friendly regulator: the Office of Thrift Supervision (OTS).

The Post points out, I think quite rightly, that the OTS has a poor record of late. Three of the largest thrifts it oversaw have failed this year: Downey Savings in Newport Beach, IndyMac Bank in Pasadena and Seattle’s Washington Mutual, the largest bank in U.S. history to go bust.

Angelo Mozilo file photo by Bloomberg

I have an anecdote to share on this issue. While working on the book “Chain of Blame,” I interviewed in February Robert “Bob” Gnaizda, general counsel of consumer group the Greenlining Institute, and he described a meeting with former Countrywide CEO Angelo Mozilo. To hear Gnaizda tell it, he wanted to talk about banks setting voluntary standards for home lending, especially in regards to giving consumers adjustable-rate loans.

But Mozilo in the December 2006 meeting with Gnaizda dismissed the idea that adjustables might be a problem. Instead, he wanted to talk about switching his regulator from the Office of the Comptroller of the Currency to OTS.

Here’s Gnaizda’s recollection:

Mozilo tried to force me to support that. Greenlining was the only one to oppose it. In front of everyone he said, “I know you are not going to oppose us, but I will not accept neutrality. I insist you directly support us.”
I said nothing. He said it twice.

When he left I told his people I would not (support the change). … I thought OTS was too weak and understaffed to administer Countrywide.

Well now Countrywide is a unit of Bank of America, which is overseen by the OCC. About the time I interviewed Gnaizda, Mozilo stopped talking to the media because of Countrywide’s pending sale to Bank of America and all the bad press he was getting. So I never got his version of the meeting.

As for the OTS, here is the Washington Post’s take:

As the banks under OTS supervision expanded high-risk lending, the agency failed to rein in their destructive excesses despite clear evidence of mounting problems, according to banking officials and a review of financial documents.

Instead, OTS adopted an aggressively deregulatory stance toward the mortgage lenders it regulated. It allowed the reserves the banks held as a buffer against losses to dwindle to a historic low. When the housing market turned downward, the thrifts were left vulnerable. As borrowers defaulted on loans, the companies were unable to replace the money they had expected to collect.

And here is the agency’s main response in the story:

Scott M. Polakoff, the agency’s senior deputy director, said OTS had closely monitored allowances for loan losses and considered them sufficient, but added that the actual losses exceeded what reasonably could have been expected.

“Are banks going to fail when events occur well beyond the confines of reasonable expectation or modeling? The answer is yes,” he said in an interview.

I recommend reading the entire story, which is HERE.

And in other mortgage news…

Posted in: Bank of America • Countrywide • Downey Financial • IndyMac • Meltdown • Washington Mutual | 3 Comments »

JPMorgan eliminating 570 jobs in O.C.

December 3rd, 2008, 12:46 pm by Mathew Padilla

(Update II: total O.C. WaMu employment).

JPMorgan on Monday gave 60-day notice to 250 employees in and around the Irvine office campus of Washington Mutual and asked 321 to stay on temporarily as part of a transition team.

Those who stay on temporarily, possibly until late 2009, will get double pay, said Gary Kishner, a company spokesman. He said 1,350 employees will remain in Orange County after the cuts.

JPMorgan is cutting 9,200 jobs in all tied to Washington Mutual, which it acquired Sept. 25 when WaMu became the largest bank to fail.

Kishner said the Irvine employees being let go are office workers and do not belong to any retail branches. No retail jobs are impacted, he said.

“Customers will not be affected in any way,” Kishner said.

He said the cuts are designed to eliminate redundancies between WaMu and JPMorgan.

WaMu branches will be branded as Chase next year. Chase has a strong presence in the Northeast and gained a West Coast foothold with the WaMu acquisition.

That’s it for now. Read my original post on the layoffs HERE.

And in other news…

Posted in: Chase • Company Watch • Meltdown • Washington Mutual | 14 Comments »

Chase-WaMu to help 400,000 avoid foreclosure

October 31st, 2008, 12:13 pm by Mathew Padilla

Chase, the retail bank of JPMorgan Chase, said today it plans to help up to 400,000 homeowners with $70 billion in loans avoid foreclosure. And it will stop putting loans into foreclosure for the next 90 days.

The programs apply only to borrowers who live in the homes the loans are against.

In addition to Chase customers, the bank is targeting borrowers with loans from Washington Mutual and EMC, a former unit of Bear Stearns. JPMorgan previously acquired the assets of WaMu and nearly all of Bear Stearns. Customers of Encore Credit, an Irvine-based subprime lender bought by Bear Stearns before it nearly failed, would be included if they meet the other workout criteria.

The new program is in addition to 250,000 borrowers already helped since early 2007, Chase said. Washington Mutual was the largest lender in Orange County last year. Read more about that HERE.

Chase said over the next 90 days, as it prepares to expand its loan-aid efforts it will not put any more loans into foreclosure if the loans are owned by Chase, WaMu or EMC. Otherwise, it needs approval of investors to tinker with the foreclosure process. (Photo Courtesy of Bloomberg.)

Here’s more on what Chase plans to do:

  • “Establish 24 new regional counseling centers to provide face-to-face help in areas with high delinquency rates, building on the success of one- and two-day Hope Now reach-out days.
  • Add 300 more loan counselors — bringing the total to more than 2,500 — so that delinquent homeowners can work with the same counselor throughout the process, improving follow-through and success rates. Chase will add more counselors as needed.
  • Create a separate and independent review process within Chase to examine each mortgage before it is sent into the foreclosure process in order to validate that each homeowner was offered appropriate modifications. Chase will staff the new function with about 150 people.
  • Not add any more Chase-owned loans into its foreclosure process while enhancements are being implemented.”

Gary Kishner, a spokesman with WaMu, said California will likely get a new regional center, but he did not know if it would be located in Orange County.

Chase’s announcement comes weeks after Bank of America and its subsidiary Countrywide said they would help 400,000 borrowers (seems that’s a magic number). But in the BofA/Countrywide case, it was part of a settlement with attorneys general in 11 states over Countrywide’s lending practices.

And some highlights from the Chase-WaMu saga…

Posted in: Bailout Buzz • Chase • Defaults & Foreclosures • Meltdown • Washington Mutual | 27 Comments »

Three super banks to dominate O.C. lending

October 6th, 2008, 7:01 am by Ronald Campbell

So who was the biggest home lender in Orange County and the state last year?

Hint: It ran a very annoying ad campaign.

Another hint: Terminated with extreme prejudice.

Yep, WaMu.

Washington Mutual easily outdistanced Wells Fargo and Bank of America, according to our analysis of The Fed’s Home Mortgage Disclosure Act database. Countrywide, which operates under two names, was close behind.

WaMu was a big subprime player, and that helped make it among the biggest casualties in the credit crunch last month. It also helped WaMu lead the mortgage market in Orange County, making $5.4 billion in mortgages, which accounted for 13% of the $40.4 billion total.

Two other members of the top 10 mortgage lenders — Countrywide and IndyMac — also failed or were swallowed up, and a third, World Savings, played a part in parent Wachovia’s forced trip to the altar.

Here’s an interesting stat: Bank of America and Countrywide Financial together accounted for 19% of the market in O.C., or nearly 1 in every 5 loans made. Those two companies are now one.

And how about the other big mergers? Wells Fargo is buying Wachovia, and JPMorgan Chase took over WaMu. Wells, Wachovia, JP Morgan, WaMu, BofA, and Countrywide together last year did a combined $20.2 billion, or nearly half the market. If the Wells-Wachovia deal goes through, then there will be only 3 independent companies, where once there were six making 1 out of every 2 loans in Orange County.

Below are the top 10 mortgage lenders in Orange County in 2007:

Lender Prime Subprime Total Subprime percent
WASHINGTON MUTUAL BANK $4.8 billion $662 million $5.4 billion 12.2%
WELLS FARGO BANK, NA $3.3 billion $51 million $3.4 billion 1.5%
BANK OF AMERICA, N.A. $2.7 billion $62 million $2.7 billion 2.3%
COUNTRYWIDE HOME LOANS $2.4 billion $302 million $2.7 billion 11.1%
COUNTRYWIDE BANK, FSB $2.1 billion $295 million $2.4 billion 12.3%
WORLD SAVINGS BANK, FSB $1.3 billion $551 million $1.9 billion 29.3%
JPMORGAN CHASE BANK $1.7 billion $39 million $1.7 billion 2.2%
INDYMAC BANK, F.S.B. $1.4 billion $329 million $1.7 billion 19.3%
CITIMORTGAGE, INC $1.1 billion $9 million $1.1 billion 0.8%
ABN AMRO MTG GROUP INC $806 million $2 million $808 million 0.3%

And here are the top 10 statewide:

Lender Prime Subprime Total Subprime percent
WASHINGTON MUTUAL BANK $46 billion $8.4 billion $54.4 billion 15.5%
WELLS FARGO BANK, NA $37.6 billion $940 million $38.5 billion 2.4%
BANK OF AMERICA, N.A. $32.3 billion $490 million $32.8 billion 1.5%
COUNTRYWIDE HOME LOANS $23.5 billion $3.4 billion $26.8 billion 12.5%
COUNTRYWIDE BANK, FSB $20.5 billion $3.2 billion $23.7 billion 13.4%
WORLD SAVINGS BANK, FSB $14.3 billion $5.9 billion $20.2 billion 29.1%
INDYMAC BANK, F.S.B. $13.8 billion $3.8 billion $17.6 billion 21.6%
JPMORGAN CHASE BANK $14.3 billion $490 million $14.8 billion 3.3%
CITIMORTGAGE, INC $11.4 billion $160 million $11.5 billion 1.4%
NATIONAL CITY BANK $6.3 billion $880 million $7.1 billion 12.3%

Here’s more of our mortgage meltdown coverage:

Posted in: Alt A news • Bank woes • Countrywide • IndyMac • Loan volume • Meltdown • Subprime news • Uncategorized • Washington Mutual | 5 Comments »

Subprime’s dearly departed

October 1st, 2008, 3:00 am by Ronald Campbell

The list of major subprime lenders for 2006 and 2007 resembles the casualty roster from the Battle of Verdun in World War I. Only difference: way fewer walking wounded this time.

Of the 30 biggest subprime home lenders in 2006, measured by dollar volume, 22 have gone bankrupt, shut down, been sold or been seized by Uncle Sam. Most of the survivors have scaled back.

Yesterday we began exploring The Fed’s Home Mortgage Disclosure Act database by describing how Washington Mutual quadrupled its bet on subprime lending in 2007, just in time for the housing downturn.

Today we’re going deeper, using HMDA data to show what happened to the top 30 subprime lenders nationwide in 2006; these 30 together accounted for 64 percent of the subprime home loans made that year.

The list makes for grim reading:

Lender Rank 2006 Volume 2006 (billions) Rank 2007 Volume 2007 (billions) Status
New Century Mortgage Corp. 1 $36.9 NA $- Bankrupt
Countrywide Home Loans 2 $36.4 2 $17.4 Bought by BofA
Fremont Investment & Loan 3 $30.0 26 $3.0 Shut down
National City Bank 4 $30.0 17 $4.3 Struggling
WMC Mortgage Co. 5 $27.1 330 $0.1 Shut down
Option One Mortgage Corp 6 $23.9 7 $9.4 Shut down, servicing unit sold
Argent Mortgage Co. 7 $21.2 36 $2.0 Shut down
Long Beach Mortgage Co. 8 $18.2 NA $- Shut down
Wells Fargo Bank 9 $16.4 9 $7.1 Wholesale unit closed
American Home Mortgage Corp. 10 $14.5 0 $- Shut down
Accredited Home Lenders Inc 11 $13.4 23 $3.4 Wholesale unit closed
Indymac Bank 12 $12.2 3 $12.6 Seized by FDIC
BNC Mortgage 13 $11.8 14 $5.0 Shut down
Decision One Mortgage 14 $11.2 30 $2.5 Shut down
Equifirst Corp. 15 $9.8 10 $6.7 Switched to FHA
Countrywide Bank 16 $9.3 5 $11.1 Bought by BofA
Chase Manhattan Bank USA 17 $8.0 8 $9.2 Wholesale unit closed
Greenpoint Mortgage Funding 18 $7.3 15 $5.0 Shut down
Wilmington Finance Inc. 19 $7.2 19 $4.1 Wholesale unit closed
Novastar Mortgage Inc. 20 $7.1 39 $1.8 Shut down
Resmae Mortgage Corp. 21 $6.8 48 $1.2 Shut down
Homecomings Financial Network 22 $6.8 18 $4.2 Shut down
Beneficial Co. 23 $6.0 11 $6.7 Operating
First Magnus Financial Corp. 24 $5.9 NA $- Shut down
Washington Mutual Bank 25 $5.6 1 $19.7 Seized by FDIC, sold to JPMorgan Chase
Encore Credit Corp. 26 $5.0 NA $- Shut down
Lehman Brothers Bank 27 $5.0 12 $6.2 Bankrupt
First NLC Financial Services 28 $4.5 NA $- Shut down
People’s Choice Financial Corp. 29 $4.5 NA $- Shut down
HFC Co. 30 $4.4 16 $4.9 Operating

Countrywide shows up twice by the way because it operates under two federal regulators. The Fed oversees Countrywide Home Loans while the Office of Comptroller of the Currency supervises Countrywide Bank.

WaMu was not the only major lender that rolled the dice on subprime in 2007.

World Savings made WaMu look timid, expanding its subprime business by seven times, from $1.5 billion in 2006 to $10.65 billion in 2007. Banking operations of its parent, Wachovia, were just taken over by Citigroup in a shotgun marriage arranged by the Fed.

And then there’s Bear Stearns — remember them? — who doubled their subprime lending from $1.95 billion in 2006 to $3.9 billion in 2007.

World Savings and Bear Stearns were both too small in 2006 to make our list.

Thanks to Matt for digging up the status of all the lenders. In many cases that involved grave-digging.

We’ll continue our exploration of HMDA in future posts. If you have an idea, please tell us in the Comments section or send me an e-mail.

Here’s more mortgage meltdown coverage:

Posted in: Bank woes • Bear Stearns • Citigroup • Countrywide • Credit Crunch • Fed • Fremont • IndyMac • New Century • Option One • Subprime news • Uncategorized • Washington Mutual | 18 Comments »

WaMu and subprime

September 30th, 2008, 3:00 am by Ronald Campbell

CORRECTION: A reader points out that Washington Mutual affiliate Long Beach Mortgage Co. was a huge subprime player in 2006. Long Beach Mortgage made $18.2 billion in high-priced loans in 2006, according to federal mortgage statistics. WaMu closed Long Beach Mortgage in 2007 and did not report any loans under that name to the Fed. WaMu and Long Beach together made $23.79 billion in subprime loans in 2006, $4 billion more than WaMu reported making in 2007.

HERE’S WHAT RAN PREVIOUSLY:

So how did Washington Mutual, once a financial juggernaut, become the biggest failed bank in history?

One clue comes in newly released numbers from the federal government. According to the Fed’s Home Mortgage Disclosure Act database, WaMu nearly quadrupled its investment in high-risk subprime (and to a lesser extent Alt-A) loans after the housing boom ended.

In 2006, WaMu made $5.56 billion in high-priced home loans; that was a bit over 5 percent of its total home-loan volume. In 2007, as the housing market began to seriously tank and subprime defaults soared, WaMu, uh, bet the bank on subprime. It made $19.7 billion in high-priced home loans — more than any other lender nationwide. That was 19 percent of its home-loan business. (The government tracks subprime by interest-rate charged, instead of credit score of borrower.)

WaMu had plenty of company making bad bets on subprime in 2007. The second- and third-biggest subprime lenders in 2007 were Countrywide Home Loans (absorbed by Bank of America) and IndyMac (closed by the FDIC).

We’re analyzing the 2007 HMDA data, all 26 million records worth, right now. But if you’d like to look up home mortgage statistics for your favorite bank, CLICK HERE.

And for more on WaMu’s colorful past….

And more mortgage meltdown coverage…

Posted in: Company Watch • Meltdown • Subprime news • Washington Mutual • • | 6 Comments »

JPMorgan-WaMu means harder-to-get mortgages

September 26th, 2008, 8:15 am by Mathew Padilla
Washington Mutual Reports Quarterly Earnings

JPMorgan Chase’s acquisition of the assets of Washington Mutual, the largest bank or thrift to fail in U.S. history, means more tight lending standards for Orange County, say brokers and lenders. Wamu was the #4 mortgage lender in O.C. and California this year, according to MDA DataQuick.

That tight lending comes because JPMorgan has long been more conservative than Washington Mutual. (Read more on the takeover HERE.) WaMu was a top subprime lender, partly as a result of buying Long Beach Mortgage back in the 1990s.

Here’s the take of three sources on the deal:

Lou Pacific, mortgage broker and consultant in Mission Viejo:
“My thoughts on WAMU are basically, the same. GREED from the borrowers up to and including the buyers of mortgage-backed securities and EVERYONE in between. I think JPMorgan will take them back to basics as I have been saying. A down payment and a job will be required for at least a year or so until things bottom out as when prices do finally hit bottom there will be another need for banks, like JPMorgan, to start making loans again like when Fannie Mae and Freddie were given the word by the Clinton Administration in 1999 to let loose and get people to start buying. One of WAMU’s major downfalls started with the purchase of Long Beach Mortgage and followed with the rush to aggressively push the POA’s (option arms), which they went after with a vengeance!”

Paul Scheper, vice president with mortgage company Loan Link Financial Services in Aliso Viejo:
“For all depositors and other customers of Washington Mutual Bank, this appears to be a simple merger of two banks. For bank customers, it should be seemless and painless. I think it’ll be business as usual. Heck, Wamu is offering a 5% CD rate for a 13-month commitment/term. That’s terrific. It’ll be interesting (and comforting) to see if it’s still available.

Washington Mutual got into trouble (like Indymac Bank and others) after it got caught up in the booming part of the mortgage business that made loans to people with bad credit, no documented income, and unverified assets. JPMorgan/Chase verifies income and has more conservative loan requirements.

I don’t see this as an earth-shattering event. It disappointing, but it’s not a shocker in given the turbulent times this past quarter.”

Michael LaCour-Little, finance professor, California State University Fullerton:
“I don’t know all the details of the transaction but my understanding is that JPMC was particularly interested in WaMu’s excellent branch network in the Western U.S., particularly California. My guess is that WaMu’s customer base, on the deposit side, was attractive, too, and it would be normal for an acquiring institution to pay a small premium to acquire such customers.

I don’t know which, if any, other assets JPMC may be acquiring but, obviously, WaMu’s large on-balance-sheet mortgage portfolio was troubled. Were the bailout plan proposed by Secretary Paulson in effect, WaMu might have survived, because it could have sold problem assets that it was otherwise compelled to write down producing the losses and capital erosion that contributed to their failure.

I would say that it is in local folks interest to have a large and well capitalized company like JPMC take over WaMu as opposed to having it simply liquidated as was, I believe, IndyMac.”

And in related meltdown coverage…

And in other mortgage news…

Posted in: Bank woes • Chase • Company Watch • Loan underwriting • Meltdown • Washington Mutual | 7 Comments »

JPMorgan buys seized WaMu, deposits are safe

September 25th, 2008, 5:21 pm by Mathew Padilla
Washington Mutual's Rating Reduced To Junk By Standard and Poor's

Washington Mutual was closed today by the Office of Thrift Supervision, which named the FDIC as receiver. JPMorgan Chase & Co. is buying the thrift’s deposits and branches. All deposits are safe. Here’s what you need to know:

  • The deal will cost JPMorgan Chase $1.9 billion, and the bank said in a statement it planned to write down WaMu’s loan portfolio by approximately $31 billion. READ AP’S STORY ABOUT THE DEAL HERE.
  • Regulators stepped in and helped facilitate the deal. To read what the regulators said about the move CLICK HERE.
  • Wamu is the 13th insured institution to fail in 2008. Worst year since 1994! See the FDIC’s list of dead banks HERE!
  • The bank will be open as usual for business, regulators said. “For all depositors and other customers of Washington Mutual Bank, this is simply a combination of two banks,” FDIC Chairman Sheila C. Bair said in a statement. “For bank customers, it will be a seamless transition. There will be no interruption in services and bank customers should expect business as usual come Friday morning.” WaMu customers with questions should call their banking representative at 1-800-788-7000 or visit www.wamu.com
  • And listen to a teleconference and read a release by JP Morgan HERE.
  • Washington Mutual has 63 branches in Orange County.
  • DataQuick says WaMu in the first 7 months of ‘08 was the #4 lender in O.C. and statewide. In O.C. 3,591 loans for $1.26 billion; California was 49,152 loans for $17.1 billion. For other stats: CLICK HERE.

On a related note: The Register recently ran a story about how WaMu loaned millions to a group of O.C. house flippers with a history of fraud. Read that story HERE.

And here are some highlights from WaMu’s long struggle….


Posted in: Company Watch • Meltdown • Washington Mutual | 16 Comments »

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