WaMu customers reassured
Thrift was ninth-largest mortgage lender in Mass.
Customers of Washington Mutual Bank, one of Massachusetts' largest home mortgage lenders, will see few changes after the giant savings and loan failed late Thursday and its business was acquired by JPMorgan Chase & Co.
Regulators at the federal Office of Thrift Supervision advised Washington Mutual mortgage borrowers to continue making their monthly payments as usual. WaMu, as it is known, was the ninth-largest home lender in Massachusetts through mid-August with 2,153 loans, according to real estate data provider Warren Group.
The collapse of WaMu is the largest bank failure in US history. But because the firm's deposits, lending, and other banking business were acquired by JPMorgan, for $1.9 billion, the collapse will spare the Federal Deposit Insurance Corp. from having to cover losses, as it would have in a typical bank seizure.
Following the July collapse of IndyMac Bank in California, the FDIC is under strain to cover the losses that are being projected to hit the banking sector because of bad loans and other credit-related problems.
Washington Mutual closed seven lending offices in Massachusetts starting last December, leaving customers here less exposed than those in other states where Seattle-based WaMu was more prominent. The company had 2,239 branches in 15 states.
Because of losses related to the soft housing market and soured loans, WaMu experienced a tremendous run on the bank, with depositors withdrawing $16.7 billion in just the last 10 days, according to the Office of Thrift Supervision, which took over the thrift.
JPMorgan and federal regulators yesterday told Washington Mutual customers they should expect business as usual from JPMorgan, which will take over Washington Mutual offices. The deal will be a powerful boost for JPMorgan's retail banking operations. It will now have 5,400 branches in 23 states. In Boston, JPMorgan has more than 700 employees providing services to mutual fund companies and other securities clients.
The terms on customers' mortgages won't change, the FDIC said, and monthly payments should be made as usual and sent to the same address until further notice. Washington Mutual's automated teller machines will remain available, the FDIC said, and checks will be processed as normal. Automated direct deposits and withdrawals will be transferred to customers' new banks, the agency added.
Washington Mutual was a big lender of subprime and other high-cost mortgages, the kind of housing loans that have defaulted in droves and are at the heart of the nation's credit crisis. Research by University of Massachusetts at Boston economist Jim Campen found that 17.2 percent of WaMu's loans in 2006 were loans such as subprime mortgages made to people with poor credit or adjustable-rate loans whose payments increased in later years.
"There was a lot of irresponsible lending in Massachusetts, and I think their subprime lending was part of that," Campen said.
Washington Mutual did not return calls seeking comment.
Mortgage specialists said they didn't expect the WaMu failure to affect the availability of loans locally, since JPMorgan already was a major lender in Massachusetts. Data from trade publisher Warren Group through mid-August ranked JPMorgan sixth in Massachusetts in loans so far this year, ahead of WaMu, with $10.9 billion in total loans made.
"Washington Mutual was making a lot of loans, but you can get the same loan from JPMorgan," said Warren Group analyst Alan Pasnik. "What's affecting people's ability to get loans is their credit," rather than the number of lenders in the state, he said. Bank of America is the largest originator of loans so far this year in Massachusetts, with 13,794.
The big losers in WaMu's collapse are its investors. Filings from the end of June, the most recent period available, showed big holders included Boston investment firms such as Wellington Management, with 66 million shares; State Street Corp., with 33.4 million shares; and Fidelity Investments, with 16 million shares. However, WaMu shares had tumbled considerably in the weeks leading to Thursday's takeover, so these firms may no longer have the same amount of shares.
Shares of other banks were shaken up in trading yesterday. Banks seen as well-positioned rose including JPMorgan itself and Bank of America. Shares of others fell including those of Wachovia Corp., which reportedly was in merger talks last night. Wachovia is the parent of Boston's Evergreen Investments.
Ross Kerber can be reached at kerber@globe.com. 