Chase Shutters WaMu Warehouse Division
JP Morgan Chase & Co. (JPM) has said it is closing the warehouse lending division it bought from Washington Mutual. "Chase bought WaMu's warehouse lending business last spring," a company spokesperson told HousingWire. "We decided it didn't fit our long-term strategy. This decision affects less than 10 active customers and about two dozen employees." National Mortgage News broke the story earlier this week, saying Chase would give its non-bank customers a few months to find new warehouse lines of credit. The announcement comes after Chase ceased its wholesale lending operations to brokers in mid-January, focusing its business on retail-oriented loans -- but not broker-originated loans -- through its correspondent channel. In a memo to employees, the bank explained the shift was necessitated not only by a concern for the quality of service at the time of origination, but by an increase in Chase’s presence as a branch-based franchise. Chase has historically relied on brokers and third-party originators when it had just 600 bank branches in four states -- as recently as five years ago -- according to the memo. With the addition of WaMu, Chase’s bank branch presence flourished and now stands at 5,000 branches serving 23 states, the memo said. The troubled WaMu shut down in late September by regulators and its combined $307 billion in banking assets and total $188 billion in total deposits were sold off to Chase for just $1.9 billion. “The housing market downturn had a significant impact on the performance of WaMu’s mortgage portfolio and led to three straight quarters of losses totaling $6.1 billion,” said Office of Thrift Supervision director John Reich. The thrift regulator said it that “WaMu was in an unsafe and unsound condition to transact business,” and that the bank saw depositors yank $16.7 billion in deposits since Sept. 15. In late November, Chase said it would cut 9,200 WaMu jobs; 4,000 were slated to be cut by the end of January with the remaining cuts to occur before the end of 2009. Write to Diana Golobay at email@example.com. Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.