WaMu Stung By Rising Rates

Company expects Q3 loss due to bad hedging
By MortgageDaily.com staff
9/10/2003

In a Form 8-k filing with the Securities and Exchange Commission, Washington Mutual Inc. warned that it expects a loss in the third quarter from sale of mortgage loans as a result of "imprecisions in our tracking of loan commitments."

The filing included comments made to investors at the Lehman Brothers 2003 Financial Services Conference in New York Tuesday.

"This problem came to light as a result of the spike in rates in late July and August which lead to increased closing volumes," the filing said. "The result will be a loss in this quarter from sale of mortgage loans, partially offset by pipeline hedging activities.

"We took prompt and immediate steps to address these operational challenges."

The Seattle-based banking behemoth is among the country's biggest mortgage lenders -- with $108.16 billion in home loan production reported for the second quarter of this year.

Company chairman Kerry Killinger reportedly declined to quantify the loss or forecast how it would affect the company's overall earnings, the Wall Street Journal reported.

While rapidly rising rates have recently devastated smaller companies such as Capitol Commerce Mortgage of Sacramento, Calif., and Fidelity Mortgage Co. of Tucson, Ariz., Washington Mutual's woes present problems of a different scale.

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