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Originally published December 10, 2007 at 12:00 AM | Page modified December 11, 2007 at 12:43 PM

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WaMu laying off 3,150; closing home loan stores

The nationwide housing slump and collapsed mortgage markets have taken yet another toll on Washington Mutual — specifically, on its...

Seattle Times business reporters

The nationwide housing slump and collapsed mortgage markets have taken yet another toll on Washington Mutual — specifically, on its employees and shareholders.

The Seattle-based thrift, one of the nation's largest home lenders, said Monday it will:

• Cut 3,150 jobs, mostly in its struggling home loans business;

• Shutter nearly two-thirds of its home-loan stores;

• Close its 5-year-old mortgage-backed securities brokerage;

• Slash its quarterly dividend to 15 cents per share, from 56 cents.

The company also said it would sell $2.5 billion worth of convertible preferred stock. That, along with the dividend cut and the other closures and reductions, should give WaMu $3.7 billion more in capital to work with as it tries to ride out the nation's worst financial crisis since the savings-and-loan debacle of the late 1980s and early 1990s.

Employee reaction

Rumors and tension filled WaMu's home loan offices on Monday afternoon, with employees anxiously waiting to hear whether their jobs were safe. Workers said they did not see the cuts coming, despite a downturn in the mortgage market and WaMu's loan woes.

"We had no clue this was coming," said one Seattle-area loan consultant who has worked at WaMu for five years. "The market's slow, but that just means you call old clients and things like that."

He said he expects to stay in lending, even if his job at WaMu is cut, and he tries not to worry about it too much. "You can't be too concerned or you'll give yourself a heart attack," he said.

Overall, he said, he believes WaMu was among the more responsible mortgage lenders when the market was hot, but he added that it's too soon to know for sure whether the company handled everything properly or whether top executives should lose their jobs.

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Already, rumors about high-level job losses had permeated his office.

"We've heard some of the people in higher positions are losing their jobs, managers who that never would have happened to in the past," he said. "That has us scared."

Another Seattle-area loan consultant said she moved to WaMu in March, seeking job security, but was laid off on Monday.

"I think it's heartless," she said by phone while packing her belongings.

"I know we've had it rough, but I was worried about getting production up," she said. "I guess this industry doesn't have any security."

She wants to switch industries but has no definite plans. "This has to sink in."

Mortgage troubles

WaMu, like other big players in the once-booming mortgage market, has been whipsawed by negative developments on both ends of its business. With prices and sales volumes dropping across much of the country, more and more homeowners are defaulting on their home loans — and not just the "subprime" loans that have garnered most of the public attention.

That has eroded the secondary markets for mortgages on which WaMu and other lenders have long relied to continue supplying cash for their lending operations, and left them holding untold thousands of mortgages of dubious value.

WaMu made its announcement minutes after regular trading ended on the New York Stock Exchange. In after-hours trading, WaMu shares were trading at $18.33, down $1.55 or more than 7 percent, after ending the regular session rising 85 cents to $19.88.

Drew DeSilver: 206-464-3145 or ddesilver@seattletimes.com

Copyright © 2007 The Seattle Times Company

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