Washington Mutual Inc.’s continued hiring of JPMorgan Chase & Co. veterans to fill the senior ranks of its home loan operations has raised the question of what changes they will make.
On Monday, Wamu announced that it had hired three executives, all of them JPMorgan Chase veterans. John Berens will be the Seattle thrift company’s senior vice president for service delivery, Youyi Chen will be the senior vice president for mortgage portfolio management and research, and Bill Murray will be the senior vice president and division finance officer for mortgage servicing.
In January, Wamu hired another former JPMorgan Chase executive, Stephen Rotella, as its president and chief operating officer. On Monday, Wamu said he had also been put in charge of its home loan division, at least temporarily.
Though a Wamu spokeswoman said Tuesday that any discussions of Mr. Rotella’s focus would be “premature,” analysts say the most pressing needs in its mortgage operations are in expense and hedging management.
Paul Miller, a Friedman, Billings, Ramsey & Co. Inc. analyst, said he applauded Mr. Rotella for stepping up to fix those problems, and Wamu for letting him do so.
“I just don’t think these guys … completely understood what they had gotten themselves into,” Mr. Miller said. “I think they’ve lost control of their cost structure, especially on the mortgage banking side,” where a refinancing boom had once covered up the issues, he added.
The more interesting developments may be in the product lineup, where some brokers say executives can make all the differences.
“I’ve seen it where a bank just becomes a different bank almost overnight,” said Ellen Bitton, the CEO of the New York brokerage Park Avenue Mortgage Group Inc.
One area where Wamu might follow JPMorgan Chase’s lead is in forming relationships with home builders and realty firms, such as joint ventures.
Another idea for Wamu to explore might be bulk purchases of servicing rights. Sources have said JPMorgan Chase has been the only lender to consistently bid on bulk servicing deals in recent years.
Wamu could also be looking for ways to be more competitive and innovative in fixed-rate products and longer-term hybrid adjustable-rate mortgages.
Golden West Financial Corp. and Wamu have traditionally dominated the market for option ARMs, which allow for negative amortization. However, a host of new lenders have invaded this market niche amid heavy home price appreciation in many places.
Also, the loans’ possible negative amortization may eventually look less appealing to consumers in a rising rate environment.
ARMs made up 68% of Wamu’s fourth-quarter volume. During an investor day in November, Craig Chapman, one of four executives to have run the home loan business in the past 18 months, said 40% of its third-quarter originations were option ARMs.
Before bringing in Mr. Rotella, Wamu hired Taj Bindra, the chief financial officer of JPMorgan Chase’s home loans group, to be its executive vice president of home loans finance and servicing operations. The three hires announced Monday will report to Mr. Bindra.
Wamu also said it is looking for a new CEO for its home loan division, but it has put Mr. Rotella in charge temporarily and said Mr. Chapman will again focus exclusively on commercial lending. That business includes Wamu’s nonprime mortgage origination unit, Long Beach Mortgage Co.
Mr. Chapman took over the business early last year from Deanna Oppenheimer, the head of retail banking operations, who then left Wamu on Monday. She had succeeded the longtime chief Craig Davis in late 2003.
