Washington Mutual will lay off 3,000 employees as it closes all 186 of the bank’s freestanding home loan offices and stops making loans through mortgage brokers, the company said this week in announcing a plan to raise $7 billion to offset mounting losses.
WaMu officials released a preliminary estimate that the bank racked up a $1.1 billion net loss for the first quarter, with provisions for loan losses rising to $3.5 billion and net charge-offs on bad loans hitting $1.4 billion.
Bank officials won’t announce first-quarter earnings until April 15, but said they intend to slash quarterly dividends from 15 cents per share to 1 cent, a move that will preserve $490 million in capital a year.
WaMu announced an agreement to raise $7 billion through the sale of equity securities in order to maintain the bank’s capital ratios. The company raised $1.54 billion through the sale of 176 million shares of common stock at $8.75 per share, and plans to raise another $5.5 billion through the issue of 55,000 shares of preferred stock at $100,000 per share.
The actions announced on Tuesday are similar to steps WaMu announced at the end of 2007 to cut expenses and raise cash.
On Dec. 10, the company said it would lay off 3,150 workers and close 190 of 336 home loan centers as it issued $2.5 billion in common stock. The layoffs announced in December included about 2,600 positions in home loans, plus 550 corporate and support positions (see Inman News story).
A WaMu spokesman said the announcement will result in another 3,000 layoffs and the closure 186 remaining freestanding home loan offices.
According to the bank’s last annual report, the company employed 49,403 people at the end of 2007, down nearly 19 percent from 60,798 at the end of 2005.
WaMu recorded a $67 million net loss for 2007, compared to a $3.56 billion in 2006, a reversal the company blamed on losses in its home loan portfolio and turmoil in secondary markets for loans.
The bank was forced to transfer $17 billion in nonconforming real estate loans it had been planning to sell to investors to its own loan portfolio in the third quarter of 2007. That’s one reason WaMu’s nonperforming assets ratio nearly tripled last year, from 0.80 percent at the end of 2006 to 2.17 percent at the end of 2007.
In the fourth quarter of 2007, WaMu discontinued all remaining subprime mortgage lending and wound down mortgage banker finance warehouse lending operations.
WaMu also faces several lawsuits related to charges that the bank pressured appraisers to inflate home values.
On Nov. 1, New York Attorney General Andrew Cuomo sued First American Corp. its eAppraiseIT subsidiary, saying the companies allowed WaMu to pressure them into inflating appraisals. First American has denied the allegations and WaMu was not named as a defendant in that case, which led Fannie Mae and Freddie Mac to adopt new appraisal standards for lenders they do business with (see story)
Although not charged with wrongdoing by Cuomo, WaMu faces several lawsuits from shareholders and borrowers related the New York attorney general’s allegations, including a Feb. 8 claim in California by lawyers seeking to represent borrowers who obtained loans from the bank using appraisals performed by eAppraiseIT and Lender’s Service, Inc.
