Wholesale Lending Changes
Wednesday, April 16th, 2008Its been another eventful week for wholesale lenders. Washington Mutual announced they are exiting the wholesale market and focusing exclusively on retail operations. The last day for brokers to submit loans to Washington Mutual’s wholesale operation was April 10, 2008, and wholesale operations will officially close August 31, 2008.
In March 2008, reports began to spread announcing that Washington Mutual was “melting down.” According to cnnmoney.com, the company it a 12-year low on March 7 with shares of the Seattle-based lender dropping 15% to $10 per share after The Wall Street Journal reported that WaMu, under pressure from regulators, had begun looking for cash infusions from private equity and other investors.
According to Bloomberg (April 8), Washington Mutual does not stand alone. Citigroup, Bank of America, and Wells Fargo have the thinnest safety cushions against losses reported in seven years. These margins may drop further in coming weeks as credit ratings on $704 billion of bonds have been cut following the decline in the housing market nationally. Sheila Bair, chairman of the Federal Deposit Insurance Corporation, said last week “that downgrades may compromise bank capital ratios enough that some of the largest institutions will no longer be considered well capitalized.” If this happens (banks with capital levels below regulatory benchmarks), then these institutions could be subject to even greater scrutiny from regulators.
What does this mean to you as a real estate agent? Ensure that your lending partner is not captive to a single mortgage institution or investor. This is a market where diversification will serve the client’s best interests.