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Wachovia curtails loans in 19 states

August 09, 2008|From Bloomberg News

Wachovia Corp., the fourth-largest U.S. bank, will stop making mortgage loans through its own branch offices in 19 states, as the fallout from its 2006 acquisition of Northern California's Golden West Financial Corp. persists.

The bank will cut 125 jobs as part of the move, spokesman Don Vecchiarello said Friday. The Charlotte, N.C., company, which ranked seventh among U.S. home lenders last year, still offers mortgages nationwide through Internet, telephone and direct-mail service.

Last month, Robert K. Steel, a former Treasury official, replaced Kennedy Thompson as chief executive. Thompson had led the $24-billion purchase of Golden West, but the mortgage lender's portfolio contributed to Wachovia's second-quarter loss of $8.9 billion.

"We want to focus on building customer relationships, especially through our retail offices," Vecchiarello said.

The bank will still offer mortgages through branches in 18 states, he said.

Wachovia plans to cut 10,750 jobs and $2 billion of expenses by the end of 2009. It is trimming 4,440 positions from the mortgage unit.

Wachovia shares gained 81 cents, or 4.7%, to $17.93. The stock is down 53% this year.

Steel, 57, must decide what to do about $122 billion of remaining Golden West mortgages. Two-thirds are in California and Florida -- two of the hardest-hit states in the U.S. housing slump. The bank said last month that it expected home prices to tumble an additional 14% in California and 19% in Florida over the next 18 months.

Wachovia expects its losses on the Golden West mortgages to reach about 11%, or about $14 billion, over the next few years because of declining prices. Deutsche Bank analyst Michael Mayo estimated Aug. 5 that the loss would be closer to 20%, or $24 billion.

Wachovia is closing mortgage offices in all 19 states, while maintaining its 29 retail bank branches in Illinois, Kansas and Mississippi, Vecchiarello said. The company won't write mortgages through employees in those three states.

The 16 other states are Idaho, Indiana, Iowa, Massachusetts, Michigan, Minnesota, Missouri, Nebraska, Ohio, Oklahoma, Oregon, Rhode Island, South Dakota, Utah, Washington and Wisconsin.

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