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Ouch - in my previous positions as a loan officer for smaller community banks, I sold a LOT of loans to Washington Mutual (including the one on my own house!). Check out this article for details, and also check out what Housing Wire has to say about it here. Here’s my take on it:
1. Washington Mutual is making some drastic moves in a time where the market is changing dramatically. It’s a life saving effort, and it’s one that they have to do. Will it work? I don’t know. Is it enough? I doubt it, I think we’ll see more from them in the future.
2. If Washington Mutual is feeling that much pain right now, what is happening over at Countrywide right now?
3. For years, Washington Mutual was one of the major forces in the wholesale and correspondent lending fields, at least in my neck of the woods (Western Michigan). I think we should all go back and take another look at Morgan’s post “Dead Man Walking” because at shortly after the market closed today another nail got pounded in the wholesale lending industry’s coffin.
4. A friend of mine who is an appraiser told me today about new rules that Countrywide has come out with that appraisers have to follow. Let’s just that calling them “restrictive” is being nice. In a soft market, being able to meet their criteria is very close to impossible.
Hang on to your hats, it’s going to be a wild ride!
Tom - great post! I was going to cover the same thing this evening. We’ve documented the tenuous position that WaMu has been in over the past year. The major red flags?
1. the majority of their non-cash profit coming in the form of deferred interest from pay-option arms.
2. the lowest cash reserve of any of the major banks.
Those two are enough to end you up in chapter 11 or sold to a brave bidder.
http://www.thestreet.com/s/is-wamu-the-next-countrywide/newsanalysis/ratings/10375529.html
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