Financial Insight

Does $5 billion buy you the right to shutter Washington Mutual's broker business?

You bet it does. It buys you the right to tell Washington Mutual to eliminate the business channel by May 31st (loans must lock by tomorrow, and most loans must fund by June 13th). WaMu announced yesterday to their employees that they are closing down their wholesale loan division, with yet-to-be-determined cuts in retail. Rumors had swirled about their wholesale business channel for quite some time, but this announcement came as a surprise to many wholesale reps. Supposedly closing wholesale was a stipulation from a private equity firm that was giving them $5 billion (Too risky? The investor didn’t like the servicing performance? It doesn’t fit their business model?). A rumored $5-7 billion capital infusion for WaMu follows other investors injecting capital into banks and brokerages, including Countrywide, Citigroup, Merrill Lynch, Bear Stearns, and UBS. The new capital for WaMu would be provided by a group led by private-equity firm TPG Inc., based in Texas, the Wall Street Journal reported yesterday.

Mortgage prices are roughly unchanged this morning, and aside from the WaMu news there is little news. We will have the release of the minutes of the March 18^th FOMC meeting, along with February’s pending home sales (expected to have decreased -1% following January’s unchanged). Analysts will mostly be focusing on the FOMC minutes for a better sense of what motivated the Fed’s 75 basis point reduction a few weeks ago and what the near-term future might hold for cuts. FNMA’s trading desk reported that for the super-sized conventional jumbos, “the portfolio improved its whole loan pricing to 1.5 points behind conventional conforming for par/premium coupons and 1.875 points behind conventional conforming for discounts.”

If I were considering financing/refinancing a home, I would....
Lock if my closing were taking place within 7 days...
Lock if my closing were taking place between 8 and 20 days...
Float if my closing were taking place between 21 and 60 days...
Float if my closing were taking place over 60 days from now...
This is only my opinion of what I would do if I was financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.