WaMu shares plunge 17% on N.Y. probe, housing outlook
Washington Mutual shares, which already had lost nearly half their value this year, sank further today under the combined pressure of intensified legal scrutiny and the company’s darkening outlook on the nation’s deepening mortgage slump.
WaMu shares closed down $4.19, or 17.3 percent, at $20.04.
This morning, New York Attorney General Andrew Cuomo called on Fannie Mae and Freddie Mac - the giant government-sponsored mortgage investors - to appoint independent examiners to review the billions of dollars of WaMu mortgages they’ve bought. The two companies said they would comply.
In a lawsuit filed last week against an appraisal management company used by WaMu, Cuomo accused the Seattle-based thrift of pressuring appraisers to inflate home values.
Though WaMu wasn’t sued directly because of jurisdictional issues, Cuomo’s suit cast new doubt on the company’s practices during the housing boom and on the underlying quality of its loans.
Also today, in a previously scheduled presentation to investors and analysts, WaMu executives reiterated their bleak view of the nation’s housing market and its impact on the company’s operations.
Industrywide, mortgage originations could fall to $1.5 trillion next year, from an estimated $2.4 trillion this year and $2.8 trillion in 2006, the company said.
The company has said it will set aside $1.1 billion to $1.3 billion this quarter to cover loans that go bad. Today said it expects to set aside a similar, or slightly larger, amount in the first quarter of 2008.