Wachovia To Exit Retail Mortgages in 19 States: Report
Newly-minted and Treasury-pedigreed CEO Richard Steel may not be making further changes to his management team at Wachovia Corp. (WB), but other changes are clearly in the works. Like exiting a chunk of retail mortgage lending, for starters. Wachovia is exiting retail mortgages in 19 states including Illinois, according to a published report Friday in the Chicago Tribune. Citing a company spokesperson, the Tribune reports that the exit from branch-based mortgage origination will cost roughly 125 workers their jobs, 20 of them in Illinois. The moves comes as the company is looking to refocus its operations in locations where it has a meaningful retail branch presence, according to the report, and is effective Sept. 30. "We're not going to have any Wachovia mortgage-branded, face-to-face sales staff in those states," a company spokesman told the newspaper. Wachovia spokesman Don Vecchiarello had not responded to requests for further comment, or a request for identification of the other 18 states affected by the planned exit from retail lending, by the time this story was published. Wachovia CEO Richard Steel reiterated last week that the bank will not look to equity markets to raise additional capital, although he did acknowledge that fresh capital was needed. Instead, he said that Wachovia would meet its capital needs through asset sales and cost savings measures. Exiting a chunk of retail mortgage lending certainly qualifies as a cost saving measure. Wachovia reported a loss of $8.9 billion, or $4.20 per share, during the recently-completed second quarter, and the planned elimination of 10,750 jobs. The bank also became the latest major commercial bank to exit the wholesale mortgage origination channel, as well. The record loss included $5.6 billion in credit costs, including a $4.2 billion loss provision covering expected future losses in the bank’s substantial mortgage holdings; earnings were also affected by a $6.1 billion impairment to goodwill. Wachovia holds $122 billion in option ARMs, a substantial part of the bank’s $488.2 billion in total loans; no other U.S. bank has as much exposure to option ARMs in real-dollar terms. The North Carolina-based bank yanked its option ARM lending program earlier in the year, as mounting losses and continuing home price declines made the product unprofitable. Disclosure: The author held various put option contracts on WB when this story when it was published; indirect holdings may also exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.