WaMu Trims Tax Contract with LandAmerica
LandAmerica Financial Group, a provider of real estate transaction services, said it will write down its "customer relationship intangible" value by $38 million following the decision by a key customer to end tax servicing contract in two states.
Effective in October, LandAmerica said that Washington Mutual will "in-source" future tax services in California and Colorado. LandAmerica will continue to manage WaMu's remaining portfolio of tax and flood services for 23 states in the western United States.
LandAmerica said that given WaMu's decision to cease outsourcing in California and Colorado, the company evaluated its intangible assets and determined that the relationship value was impaired by $38 million, which leaves $32 million book value for customer intangibles in the tax servicing business. The company determined that a $188 million value for its intangible for its tax and flood acquisition was not impaired.
In the LandAmerica press release, WaMu's John Berens, senior vice president of servicing, said that the decision to take the California and Colorado business in-house was "strictly a business decision" and did not reflect on the quality of service received from LandAmerica.
LandAmerica's chief financial officer G. William Evans made it clear in the release that the decisions do impact his company's business.
"The loss of new contracts for WaMu and the three customers lost earlier in the year is approximately $26 million a year. Given the current operating environment, this business unit has reduced headcount by over 200 full-time equivalents, or 24% of their total head count since year-end 2003," he said.
"We have made significant improvements to the sales and account management processes to enhance client generation and retention activities. The expense actions we have taken to date have reduced operating costs by at least $10 million annually and the non-cash writedown will reduce amortization expense by approximately $5 million per year. We will continue to adjust operating costs to reflect business volume fluctuations," Mr. Evans said in the release.
Chief executive officer Theodore Chandler Jr. said that in the last two years, LandAmerica has acquired the businesses it needs to deliver quality lender services to major national mortgage originators and servicers.
"We have largely completed the accumulation stage and are now fully integrating our tax and flood businesses into our complete lender services offering. LandAmerica remains committed to the essential real estate services provided by its lender services business and to providing the highest level of services to WaMu and its many other customers," Mr. Chandler said.
Headquartered in Richmond, LandAmerica Financial Group, through its subsidiaries, provides residential and commercial customers with real estate transaction services.
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