Washington Mutual Scales Down to Four Servicing Sites

Washington Mutual will eliminate 2,700 additional mortgage jobs between the end of August and the end of this year as part of its massive cost-cutting drive, and the company has completed the consolidation of its loan servicing operation.

That's the message WaMu chairman and CEO Kerry Killinger delivered to participants at a Lehman Brothers investors conference here last month.

Mr. Killinger left little doubt that WaMu remains committed to the home loan business, calling mortgages "an integral part of our strategy."

He said WaMu has reduced the number of its loan servicing operational centers from eight to four, and he said WaMu is "moving quickly" to consolidate loan origination systems as well. He said Washington Mutual's retail banking success reflects a high-volume, low-cost business strategy.

"This is also the strategy we are applying to the mortgage banking business."

He said that checking accounts and home loans are the two most important financial relationships that a consumer typically has with a bank, and they serve as an excellent platform for cross-selling additional products. "Our goal in mortgage banking is very simple, and that is to make the mortgage banking business fully competitive in the marketplace by the end of 2005," Mr. Killinger said.

Toward that end, Washington Mutual continues to consolidate its operating platforms by closing sites and eliminating redundant technology systems. Mr. Killinger said the consolidation of the company's loan servicing systems is already largely complete.

WaMu has also eliminated 12 loan fulfillment centers nationally and plans to eliminate 12 more by the end of the year. That will leave the company with 34 fulfillment centers.

Having multiple operating platforms and technology systems makes it very difficult to "wring out savings" when mortgage origination volume declines, Mr. Killinger said.

In addition, WaMu has closed or is closing some 100 home loan offices in 19 states, mostly in areas where the company does not have a banking footprint. He said these offices represented 24% of the company's home loan centers but generated only 2% of its mortgage volume.

At the same time, he said WaMu's mortgage division would remain active in 29 of the 50 largest metropolitan areas. In fact, he said WaMu will add 150 new home loan centers over the next two years, adding 750 employees to staff them in markets where the company has a bank presence.

"Our objective is to be a low-cost, scaleable operation in all aspects of our business," he said.

He said WaMu's strength in the mortgage business is that it has the ability to offer a set of products that are attractive in just about any interest rate environment, including fixed-rate, adjustable-rate and hybrid loans. He reiterated the company's commitment to multiple loan origination channels, but acknowledged that WaMu has "de-emphasized" the correspondent lending channel. He said the company will be "opportunistic from time to time" in the correspondent lending market.

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