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Mortgage Woes Swipe WaMu

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By JESSICA MINTZ, The Associated Press

Published: December 11, 2007

SEATTLE - Washington Mutual, the nation's largest savings and loan, said Monday that problems in the mortgage and credit markets are forcing it to close offices, lay off more than 3,000 workers and set aside up to $1.6 billion for loan losses in its fourth quarter.

Additionally, WaMu slashed its quarterly dividend 73 percent and said it plans a $2.5 billion offering of convertible preferred stock. WaMu has not yet priced the offering, but increasing the number of company shares will dilute their value for existing stockholders.

In after-hours trading, WaMu shares fell $1.73, or nearly 9 percent, to $18.15 after the company's announcement.

Seattle-based WaMu dismantled much of its subprime mortgage business in September, cutting 1,000 jobs related to the sale of home loans to people with questionable credit. It folded the remaining subprime operations into its regular mortgage business.
WaMu will now get out of the subprime mortgage business. The company said it will close about 190 of its 335 home loan centers and sales offices, shut down nine call centers and eliminate 2,600 home loan workers and 550 corporate and support jobs.

The company also said it will shutter WaMu Capital Corp. and rely on third party broker-dealers to sell mortgage-backed securities.

These changes, meant to address what WaMu called "unprecedented challenges in the mortgage and credit markets," will save $140 million in the fourth quarter. But the company still expects to post a loss, in part because of a $1.6 billion charge for the write-down of goodwill associated with the shrinking home loans business.

On top of that, WaMu increased its loan loss provision to $1.5 billion to $1.6 billion for the fourth quarter, from the $1.1 billion to $1.3 billion predicted by executives in early November.

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