Massive Layoffs Continue at WaMu

Under pressure from investors following the announcement that second quarter net earnings were off nearly half from the first quarter as a result of the mortgage banking operations, the Seattle-based thrift announced another 2,500 mortgage layoffs.

“While second quarter results were affected by the volatility of our mortgage servicing rights, the root of our problem is the unacceptably high cost structure in our mortgage banking business,” CEO Kerry Killinger said in the company’s earnings announcement this week. “We know what we need to do, our efforts are well underway, and we will not be satisfied until we have fixed it.”

The wave of layoffs started Wednesday in San Antonio, Texas, where the mortgage behemoth closed its processing center and released 660 employees. The remaining job cuts will occur by the end of this year concurrently with the closure of 100 retail lending and loan processing offices in more than a dozen other states that WaMu characterized as “non-signature markets.”

“We plan to fuel significant new growth in our retail mortgage operations by re-directing resources to our most productive and profitable activities,” Washington Mutual executive Tony Meola said in the announcement.

WaMu grew from a small Seattle thrift to a mammoth national operation over the last decade by acquiring other thrifts in strategic markets. The company struggled with integrating the servicing portfolios of the acquired entities with its own, and for a period its servicing operation appeared in chaos. Many angry customers hooked up with class-action attorneys, and WaMu found itself a defendant in several cases.

But just as the company seemed to be getting its arms around the servicing operation, mortgage rates spiked and WaMu had improperly tracked its loan commitments — leading to a huge charge and the ouster of top mortgage executive Craig S. Davis.

The company cut 1,500 mortgage jobs in the third quarter last year, and another 2,000 in the first quarter.