WaFd Bank Latest to Exit Residential Mortgage Business

Seattle-based Washington Federal Bank is ready to follow in the footsteps of competitors and rid itself of the residential mortgage business burden.

The bank announced during its recent quarterly earnings release that it would cease mortgage loan originations, National Mortgage News reported. WaFd has been originating mortgages for more than a century, according to chief executive officer Brent Beardall.

With the new strategy comes layoffs slated to affect 8 percent of the company’s staff.

The bank plans to close the mortgages it has in process by mid-March while continuing to service its existing home loans and home equity lines of credit, HousingWire reported. The bank will continue business lending, including commercial mortgages, and expand its offerings to loans backed by the U.S. Small Business Administration.

In a post on LinkedIn, Beardall cited the changing landscape of single-family mortgages and how a majority of those loans are tied today to the federal government, often backstopped by Freddie Mac or Fannie Mae.

In its earnings report, the bank also cited technology and regulatory issues as rationale for abandoning the residential mortgage industry; the bank was recently informed that it needed to improve its compliance with the Community Reinvestment Act by making more loans to low and moderate-income borrowers.

WaFd Bank has more than 200 branches across nine states, mostly in the western part of the country. The bank originated $156 million worth of residential mortgages in the fourth quarter and $430 million for its most recent fiscal year, which concluded in September.

For the most recent quarter, WaFd Bank reported a net income of $47.3 million, down 23 percent from the prior quarter and 19 percent year-over-year. The company expects to realize $17 million in annual savings beginning around the middle of this year.

WaFd isn’t the only bank bailing on residential mortgages. This month, Detroit-based Ally Financial announced it would enact layoffs, end its residential mortgage originations and start the search for strategic alternatives to its credit card business.

— Holden Walter-Warner