Home Lending Profits Plummet at WaMu

Washington Mutual, Seattle, has reported that it earned just $47 million off its residential lending business in the fourth quarter, a 71% decline from the level of a year earlier.Compared with those of the third quarter, home lending profits fell by 75%. WaMu chairman and chief executive Kerry Killinger attributed the earnings dropoff to a "challenging environment" in residential finance, including increased hedging costs and a flat yield curve. The thrift reports its subprime profits separately from home lending through its "commercial group." That division, which includes nonconforming lender Long Beach Mortgage, earned $164 million in the fourth quarter, a 21% gain from that of a year earlier, but a 24% decline from earnings in the third quarter. Even though its mortgage business suffered, overall earnings at the nation's largest thrift -- and third-largest mortgage lender -- rose 12% to $865 million. WaMu funded $50.4 billion in home mortgages during the quarter, including $11.7 billion in payment-option adjustable-rate mortgages. Its production volume was just about flat compared with that of the same quarter a year ago. In an analyst note, Sandler O'Neill -- which has a "hold" rating on the company -- described the mortgage business as "increasingly competitive in both the prime and subprime segments."