Wachovia exits wholesale mortgage lending
CHARLOTTE, N.C. (AP) ? Wachovia Corporation, the nation's fourth largest-bank, said Monday that it is leaving the wholesale mortgage lending business.
Beginning July 25, the company will no longer offer mortgages through brokers, joining other lenders making similar moves to exit the troubled sector.
Rival Bank of America got out of the business several months ago.
Wachovia didn't disclose how many jobs will be cut as a result of the change. More details are expected Tuesday when the Charlotte, N.C.-based bank releases its second-quarter earnings.
Wachovia spokesman Don Vecchiarello said in a statement that the company "recognized some opportunities to re-position our business" given the current market conditions.
"We believe it is important to focus on serving the needs of customers who have relationships with the bank, and who are located in geographies where Wachovia franchises are located," Vecchiarello said.
Earlier this month, Wachovia hired Robert Steel, former Treasury Undersecretary and Goldman Sachs Group Inc. executive, as its new CEO. Within a week of being on the job, the bank's shares tumbled to a new 17-year low.
Steel succeeds Ken Thompson, a chief executive officer who was ousted by the bank's board in June after a series of missteps, including the decision to buy mortgage lender Golden West Financial Corp. in 2006 for roughly $25 billion at the height of the housing boom.
That deal left Wachovia with a deteriorating $120 billion portfolio of Pick-A-Payment loans, Golden West's specialty, which let borrowers skip some payments.
Shares of Wachovia dropped more than 5 percent in after-hours trading following the announcement. They closed the regular trading session up 21 cents or 1.6 percent at $13.18, near the bottom of their 52-week range of $7.80 to $53.10.
Big banks, such as Bank of America and National City Corp., have stopped making loans through brokers entirely, relying instead on their loan officers. National City said it was forced to do so by a continuing downturn in loan demand, while Bank of America said it saw better "long-term opportunity" in working through its own loan officers.
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Beach Fanatic
And in a related story about mortgage loan originators in Florida (saw this on Channel 7 tonight):
Mortgage Originators Cause ConcernPosted: 3:41 PM Jul 21, 2008
Last Updated: 3:41 PM Jul 21, 2008
Reporter: Mike Vasilinda
The state?s Chief Financial Officer is calling for the resignation of Florida?s top mortgage regulator. The resignation is being sought after a report that as many as 10 thousand felons have been working in Florida?s mortgage industry.
The investigation found that one in every 12 loan originators, or just over 10 thousand people, had a criminal history. Despite their records, over four thousand passed criminal background checks giving them access to sensitive credit card and social security information.
Many work in fly-by-night offices. In many ways, it?s the fox guarding the hen house.
Pam Ricco of the Florida Bankers Association says there may be a reason a bank turned you down, and if someone else?s deal sounds too good to be true, it probably is.
?A bank wants to put you in a home but it wants to put you in a home you can afford to keep. And it doesn?t help anybody if people have to be foreclosed on or if they lose their home. It doesn?t help anybody.?
The mortgage industry says it has worked for years to ban those with criminal records with no help from state lawmakers.
Valerie Saunders, President-Elect of Mortgage Brokers Association says she is all in favor of strict licensing requirements.
?Our association is definitely in favor of licensing all originators, whether they be mortgage brokers, which of course are licensed already, or unlicensed originators, and that includes all unlicensed originators?
The fraud has cost millions of dollars, helping Florida achieve a dubious honor. It has the highest mortgage fraud rate in the country.
The state and national mortgage industry has been asking Florida lawmakers to license all lenders since 2002, but no action has been taken.
SoWal InsiderAuthor
The investigation found that one in every 12 loan originators, or just over 10 thousand people, had a criminal history. Despite their records, over four thousand passed criminal background checks giving them access to sensitive credit card and social security information.
The fraud has cost millions of dollars, helping Florida achieve a dubious honor. It has the highest mortgage fraud rate in the country.
The state and national mortgage industry has been asking Florida lawmakers to license all lenders since 2002, but no action has been taken.
We're Number One in Mortgage Fraud...for Crist's Sake!
Hence Floriduh's Motto: "A sunny place for shady characters."
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Beach Fanatic
Hence Floriduh's Motto: "A sunny place for shady characters."
Do you think we could make some $$$ selling bumper stickers?
Beach Fanatic
Sounds smart to me. Wachovia should cut the middle man out and shore up the balance sheet with direct lending to help re-cover the loss from the wholesale side. Just good banking.
SoWal InsiderAuthor
Sounds smart to me. Wachovia should cut the middle man out and shore up the balance sheet with direct lending to help re-cover the loss from the wholesale side. Just good banking.
More a move of desperation than a well-planned business "choice." They'll report their 2nd Qtr financials tomorrow before the bell--letting the shareholders know the number of folks they'll be kicking to the curb to help bolster up the balance sheet going forward.
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SoWal Insider
I was reading BofA's release and noted that about 6 percent of their credit card portfolio had gone bad, up from 5 percent last quarter. 6 percent of their credit card customers aren't paying their bills? That is totally f'ed up.
Beach Fanatic
People are paying their bills on their credit cards, especially those whose HELOCs have been frozen or are tapped out. Some of it may be unnecessary purchases, but I think a great deal of it is due to rising costs of necessities. This will get worse before it gets better, IMO.
Beach Fanatic
I wonder how this might compare with the early 30's?
Is it getting to that point at all?
Is it getting to that point at all?
Beach Comber
Thank God I only have $132.77 in my Wachovia account!!!
Beach Lover
The elimination of wholesale lending is a good move by Wachovia. As you may be aware, when banks lend money, they must set aside capital per regulatory requirements. As I understand, the move is intended to better allocate existing capital, which is precious in the current credit environment.
Additionally, by focusing on existing customers of the bank, risk becomes easier to control since exisiting clients have deposits etc. housed in the bank and more is known about the client.
Looks like the market is reacting favorably... WB is up 17%.
Little Fish
Additionally, by focusing on existing customers of the bank, risk becomes easier to control since exisiting clients have deposits etc. housed in the bank and more is known about the client.
Looks like the market is reacting favorably... WB is up 17%.
Little Fish
SoWal InsiderAuthor
Thank God I only have $132.77 in my Wachovia account!!!
....and you're not one of the 6,350 employees that are getting the axe.
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SoWal Insider
....and you're not one of the 6,350 employees that are getting the axe.
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..over 10,000 including contractors and open positions.
I read they might be thinking of trying to merge with somebody but there's nobody who can take on the debt and risk of the 4th largest U.S. bank. The other majors are all dealing with other tainted aquisitions.
SoWal Insider
Had to chuckle at this on Forbes
"Steel has no experience running a bank, but he did work at Goldman Sachs, and his contact there and in Washington might put him in position to broker a deal."
I could have sworn the first time I read it it went -
"Steel has no experience running a bank, but he did stay at a Holidy Inn Express last night, and his contact there and in Washington might put him in position to broker a deal."
http://www.forbes.com/2008/07/22/wa...ity-cx_md_0722markets29.html?partner=yahootix
"Steel has no experience running a bank, but he did work at Goldman Sachs, and his contact there and in Washington might put him in position to broker a deal."
I could have sworn the first time I read it it went -
"Steel has no experience running a bank, but he did stay at a Holidy Inn Express last night, and his contact there and in Washington might put him in position to broker a deal."
http://www.forbes.com/2008/07/22/wa...ity-cx_md_0722markets29.html?partner=yahootix
Beach Lover
Ash:
There is no comparison with the 30's. Regulation of banks is much stronger than the 30's. The only folks who compare today with the 30's are reporters looking for ratings. There is little reason for concern.
The Fed requires banks hold cash to support unexpected behaviors, ie. runs on banks. They consider 4% to be "adequately capitalized". The top 15 banks in the US are all "well capitalized" according to Fed guidelines. Wachovia's capital ratio is 8%, Citigroup is at 7.7%, JPMorgan at 8.3%, SunTrust at 7.3%.
Oh... and Sandy Pants... your money is secure.
No worries...
Little Fish
There is no comparison with the 30's. Regulation of banks is much stronger than the 30's. The only folks who compare today with the 30's are reporters looking for ratings. There is little reason for concern.
The Fed requires banks hold cash to support unexpected behaviors, ie. runs on banks. They consider 4% to be "adequately capitalized". The top 15 banks in the US are all "well capitalized" according to Fed guidelines. Wachovia's capital ratio is 8%, Citigroup is at 7.7%, JPMorgan at 8.3%, SunTrust at 7.3%.
Oh... and Sandy Pants... your money is secure.
No worries...
Little Fish
SoWal InsiderAuthor
..over 10,000 including contractors and open positions.
I read they might be thinking of trying to merge with somebody but there's nobody who can take on the debt and risk of the 4th largest U.S. bank. The other majors are all dealing with other tainted aquisitions.
Not a problem...if they take BAC's led in their acquisition of Countrywide:
-----------------------------------------
Investors who own debt securities issued by Calabasas-based mortgage giant Countrywide Financial Corp., which Bank of America bought July 1, won't get a guarantee of repayment from the Charlotte, N.C.-based bank. "We don't intend to guarantee the public debt but we do understand the ramifications of not paying that maturity," said Joe Price, Bank of America's chief financial officer.
Bond investors are concerned that Bank of America will absorb the best assets of Countrywide while keeping as much as $38 billion of Countrywide debt in a new unit created by the acquisition, Red Oak Merger Corp., Bloomberg News reported.
The investors speculate that Red Oak could then file for bankruptcy protection, shielding Bank of America from liability.
http://www.latimes.com/business/la-fi-moneyblog22-2008jul22,0,7046859.story
-----------------------------------------------------------------------------------
Beach Fanatic
I try to limit my posting on this site much anymore but this is an interview with Dr. Paul Craig Roberts that I think many on this site will find very interesting.
[ame="http://www.youtube.com/watch?v=LfcNf5ghrFw"]YouTube - Paul Craig Roberts on the Alex Jones Show 24/07/08 P3[/ame]
[ame="http://www.youtube.com/watch?v=LfcNf5ghrFw"]YouTube - Paul Craig Roberts on the Alex Jones Show 24/07/08 P3[/ame]
Beach Lover
Ash:
There is no comparison with the 30's. Regulation of banks is much stronger than the 30's. The only folks who compare today with the 30's are reporters looking for ratings. There is little reason for concern.
The Fed requires banks hold cash to support unexpected behaviors, ie. runs on banks. They consider 4% to be "adequately capitalized". The top 15 banks in the US are all "well capitalized" according to Fed guidelines. Wachovia's capital ratio is 8%, Citigroup is at 7.7%, JPMorgan at 8.3%, SunTrust at 7.3%.
Oh... and Sandy Pants... your money is secure.
No worries...
Little Fish
And now for a different perspective.....
http://www.minyanville.com/articles/depression-california-housing-mortgage-time/index/a/18055.
I encourage any reader here to check out Kevin Depew's other articles.
And regarding the banking system, here is one man's opinion: http://globaleconomicanalysis.blogspot.com/2008/07/you-know-banking-system-is-unsound-when.html
The crash of 1929 was barely noticed by most Americans when it happened.
The major difference between now and the 1930's is that in the 30's, Americans could still use gold and silver as currency. Because of actions by Roosevelt and Nixon, Americans can only use Federal Reserve Notes as currency in the US. Does anyone really trust the very group the created this mess(The Fed) to be able to fix it?
And can anyone in real estate in the Panhandle say that real estate is NOT in a state of Depression?
Edited
SoWal Insider
And now for a different perspective.....we sold our house in TN. in nine days.....the sky is till up there.
http://www.minyanville.com/articles/depression-california-housing-mortgage-time/index/a/18055.
I encourage any reader here to check out Kevin Depew's other articles.
And regarding the banking system, here is one man's opinion: http://globaleconomicanalysis.blogspot.com/2008/07/you-know-banking-system-is-unsound-when.html
The crash of 1929 was barely noticed by most Americans when it happened.
The major difference between now and the 1930's is that in the 30's, Americans could still use gold and silver as currency. Because of actions by Roosevelt and Nixon, Americans can only use Federal Reserve Notes as currency in the US. Does anyone really trust the very group the created this mess(The Fed) to be able to fix it?
And can anyone in real estate in the Panhandle say that real estate is NOT in a state of Depression?
Meow
we sold our house in TN. in nine days.....the sky is till up there.
...hey, Chicken Little, Bob has spoken!SoWal InsiderAuthor
And can anyone in real estate in the Panhandle say that real estate is NOT in a state of Depression?
...it's not a "depression" it's "a soft landing."
.
SWGB
...it's not a "depression" it's "a soft landing."
.
Like this one?
[nomedia]http://www.youtube.com/watch?v=HK22xc6IMss[/nomedia]
Beach Fanatic
...it's not a "depression" it's "a soft landing."
.
caused by the bursting of the "fictitious" bubble.
SoWal InsiderAuthor
Like this one?
Sorta...but more like this:
[ame="http://youtube.com/watch?v=hz65AOjabtM"]YouTube - Wile E. Coyote vs Road Runner[/ame]
Beach Fanatic
I think the real estate market is not in a soft landing or a crash. It is a crucifixion and slow death of the speculators and greedy mortgage industry. Unfortunately. innocent people are getting hurt also---collateral damage if you will. Unless and until the American people stop tolerating corruption and the government stops socializing the losses thru bailouts, our society will endure rolling bubbles--- i.e. the tech bubble, the real estate bubble, the oil bubble, the gold bubble. Where was the outrage when your house was worth 50% more than it is now? Confront the crooks and discard the wave of political correctness that insists that everyone is entitled to a mortgage. Allow people and businesses to fail if they get overextended. Hell, make me King of the World and I'll fix all this crap.
Beach Lover
More Credit Tightening News
http://seekingalpha.com/article/88891-noose-tightens-on-non-conforming-loans?source=feed
Of note:
Chase (#4 residential originator in the US)
"Chase has made a business decision to suspend our Non-Agency Fixed and ARM (Amortizing and Interest-Only) Product offerings within the Wholesale Lending Business."
US Bank (#23 residential originator in the US)
"For PURCHASE TRANSACTIONS: The Interest Only payment option will no longer be allowed for U.S. Bank Consumer Finance 1st liens when the LTV/CLTV exceeds 80%"
http://seekingalpha.com/article/88891-noose-tightens-on-non-conforming-loans?source=feed
Of note:
Chase (#4 residential originator in the US)
"Chase has made a business decision to suspend our Non-Agency Fixed and ARM (Amortizing and Interest-Only) Product offerings within the Wholesale Lending Business."
US Bank (#23 residential originator in the US)
"For PURCHASE TRANSACTIONS: The Interest Only payment option will no longer be allowed for U.S. Bank Consumer Finance 1st liens when the LTV/CLTV exceeds 80%"
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