| WaMu Expanding Subprime
New unit targeting institutional investors October 19, 2005 By PATRICK CROWLEY |
| Washington Mutual is making a deeper foray into the subprime lending business with a new conduit unit that will buy and securitize subprime mortgage loans.WaMu, as the company the Seattle-based mortgage giant is known, has begun buying loan portfolios of as much as $100 million. The company plans to buy and securitize about $5 billion of subprime mortgages this year through the new conduit unit.
“There is a significant section of the subprime market that Washington Mutual does not currently penetrate,” company spokeswoman Sara Gaugl said in an e-mail response to questions posed by MortgageDaily.com. “The creation of this subprime conduit business will enable Washington Mutual to expand its subprime origination capability.” Through WaMu Capital Corp., the company’s institutional broker dealer, the new unit will “offer institutional investors direct access to customized pools of subprime loans or mortgage-backed securities,” Gaugl said. The new conduit will also facilitate WaMu’s purchase of bulk or mini-bulk loan pools that have been underwritten and closed by mortgage banks or correspondent sellers for sale on the secondary market. Gaugl said the majority of loans purchased through the new unit “will consist of first-lien loans and assets that mimic what you see out in the subprime marketplace.” The unit is in the market for hybrid ARMs — floating-rate mortgages whose interest charges are fixed for the first two years — a small percentage of piggybacked seconds, interest only and 40-year loans, she said. Existing “A” correspondents are encouraged to sell loans to the new unit, Gaugl said. “We’re giving our customers who originate Alt-A and subprime loans a one-stop shop to satisfy their investment needs, which enhances our current service level,” she said. The new unit will be independent of Long Beach Mortgage Co., WaMu’s existing subprime unit. “These two efforts have different brands, means of sourcing collateral and securitization methods,” Gaugl said. “(Long Beach) is the subprime origination ‘arm’ of Washington Mutual and has a different business model that this new…unit. “(Long Beach) originates subprime loans through a broker/wholesale channel, and those loans are fulfilled by (Long Beach) and closed in their name,” she said. “(Long Beach) also securitizes the loans on an independent, separate shelf.” The new unit is headed by Doug Potolsky, who is senior vice president of Subprime Conduit Business within WaMu’s Home Loans Capital Markets. He is based in New York and reports directly to David Beck, director of Washington Mutual’s Capital Markets Group. In a statement from the company Beck said that establishing the new unit “marks the continuation of Washington Mutual’s ongoing effort to compete with Wall Street conduits that have grown rapidly over the last several years buying closed residential mortgage loans.” Earlier this year WaMu also launched an Alt-A conduit business, Beck said. |
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Patrick Crowley is a MortgageDaily.com feature journalist and blogger, and a reporter, blogger and columnist for The Cincinnati Enquirer. e-mail Patrick at: PatCrowley@MortgageDaily.com |
