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WaMu Pursues $1 Trillion

Washington Mutual here has always been an ambitious company, but now the company is preparing to cross a threshold that was unimaginable just a few years ago.

Within three years, WaMu hopes to service $1 trillion in mortgage loans, the president of WaMu's home loans and insurance group told investors recently. That would mean WaMu would manage mortgage loans for seven million customers - prime candidates for cross-sales of additonal products.

Today, WaMu services about $700 billion in home loans, by far the nation's largest servicing portfolio. It accounts for about 11% of the market.

But while WaMu was once an aggressive buyer of other banks and mortgage companies, the company's leaders say they plan to focus on "organic" growth rather than acquisitions to reach the $1 trillion level.

"The primary driver of this is going to be strong production from all of our channels," Mr. Davis said. He added that WaMu is striving to increase customer retention as well.

WaMu estimates that it currently accounts for just over 12% of home loan originations, and Mr. Davis said the company is shooting for a market share of 20% within five years. WaMu executives say that the company's growing share of the loan originations will allow WaMu to grow its customer base and cross-sell additional banking and insurance products, such as home equity lines of credit. Already, about 17% of WaMu's mortgage customers also buy an insurance product from the firm.

"Mortgage products are a proven customer acquisition tool," Mr. Davis said, adding that WaMu is building "capacity and efficiency with single platform systems."

The company has leveraged technology acquired from HomeSide Lending to automatef loan servicing functions, consolidating from 14 servicing facilities down to six sites.

"We expect to have all loans on one system by the third quarter of 2004," Mr. Davis said at the company's investor meeting.

Increasingly, WaMu executives are expressing strategic themes that sound like they come from Countrywide Home Loans, WaMu's California-based rival.

Countrywide has long stressed organic growth, it manages most loan servicing automation in-house with its own technology, and it has diversified its income stream by building insurance and capital market units.

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