Washington Mutual Inc. is about to follow up its burst of portfolio acquisition-driven growth in the Midwest and Northeast with a major branch-opening drive.
The companys plans call for Wamu to open more than 500 loan centers using the model of its recently launched Occasio consumer branches the word is Latin for favorable opportunity in the next two to three years. 
That would add about 200 home loan centers to the $220 billion-asset companys current network of 314, almost all of which will be converted to the new-model office. The expansion will focus on some of the East Coast markets in which Washington Mutual recently acquired a larger presence.
Washington Mutual already has some home loan centers on the East Coast, but it is trying to raise its brand awareness in the market, an effort that already has produced a major marketing campaign (American Banker, June 6). Obviously, the most growth will occur in the newer markets for us, which are farther east and in the Midwest, said Craig S. Davis, president of Wamus home loan and insurance services group, during an interview in the companys headquarters last week.
And true to the form established in the expansion of its retail banking operations, Washington Mutual will restrict its brick and mortar investments to high-growth areas. We wont enter a market if it wont support at least three home loan centers, Mr. Davis said.
These stand-alone mortgage offices will feature many of the same attractions that have already been tested in Washington Mutuals Occasio retail branches: a concierge who greets people at the door, racks of magazines and colorful wall displays for browsing, and cushy chairs for contemplating loan points or for sipping a cup of Seattles favorite beverage.
The redesign coincides with a restructuring of Washington Mutuals national network of home loan centers. Washington Mutual plans to centralize most operations and support employees who have worked in its existing mortgage offices, leaving sales staff behind to run the New Age loan centers. Wamu expects to save on real estate expenses by essentially halving the size of the average office, an effort slated to begin this year, executives say.
The company will still trail some major rivals in the mortgage lending business. San Francisco-based Wells Fargo & Co., for example, has more than 800 stand-alone mortgage stores spread throughout its 48-state territory.
Washington Mutual, a huge Seattle-based mortgage lender best known on the West Coast, recently boosted its presence on the East Coast with acquisitions of the mortgage operations of Pittsburghs PNC Financial Services Group Inc. and Bostons FleetBoston Financial Corp.
PNCs mortgage operations, based in Illinois, brought Washington Mutual 131 mortgage offices, concentrated in the Midwest and Northeast. Fleets business was more widespread, with major servicing hubs in South Carolina and Wisconsin. Washington Mutuals deal with Fleet was for correspondent and wholesale business, not for branches.
Some market watchers are expecting even bigger things from Washington Mutual. The thrift has been willing to pony up for major acquisitions recently, adding not only the mortgage businesses of Fleet and PNC but also Texas-based Bank United Corp., another big mortgage lender.
An observer said New York would be a logical market for Washington Mutual to make its next acquisition. Some potential targets would be the areas largest thrifts: Dime Bancorp Inc., GreenPoint Financial Corp., Astoria Financial Corp., and North Fork Bancorp. Inc.
Even without an acquisition, analysts said Washington Mutuals efforts to branch into new markets would add an important element of diversification to its home lending operations.
To the extent that more home loan centers go into new markets, this will help them on geographic diversification, said R. Jay Tejera, an analyst at Ragen MacKenzie in Seattle. Washington Mutuals loan origination is still heavily weighted toward California, with 42% of its loans made there.
Washington Mutual is not the first to move its support staff the employees who handle the mountain of checklists and paperwork that goes into each residential mortgage application away from the sales staff who work with customers. What made this possible was technological change, notably automated mortgage fulfillment, executives said.
Two and a half years ago, Wells Fargo moved support and processing staff out of most of its 828 stand-alone mortgage centers. Greg Gwizdz, a national sales manager for Wells Fargo Home Mortgage in Edison, N.J., said the move would have been difficult before then because the sales staff worried that being separated from the various parts of the process, such as ordering an appraisal, would slow down applications and lose them business.
Washington Mutual is installing its newly minted mortgage technology platform, called Optis, in two phases. The first, which became active in various areas of the country this year, allows the companys loan consultants to get automatic approval on an application over the Internet. The thrift says that 68% of home mortgages are approved this way and the remaining 32% are referred to a human, with about 80% of these referrals eventually resulting in a loan.
The second phase, which will be tested later this year and coincides with the restructuring and redesign of the home loan centers, puts the fulfillment process on the Optis technology platform. Routine but time-intensive tasks such as property appraisals will be automated, and loan consultants will be able to check on their status using laptop computers rather than talking to a fulfillment officer.
All these technological improvements are designed to whittle down costs. Mr. Davis said the company will actually reduce its real estate expenses even as it expands the number of home loan centers because each will occupy about half of the prime walk-in space of the average existing home loan center.
In a series of meetings in Wamus headquarters last week, executives played a short video animation of what their redesigned offices would look like, complete with animatronic loan consultants and a coffee station. The style copies that of the companys Occasio branches, with the addition of the mortgage groups aggressively branded Power of Yes slogan looming over the office.
Savings are important because of the high overhead a mortgage business typically carries, analysts said. Expenses in running a mortgage operation can be the highest of the companys business with the exception of home equity and subprime, said Bruce Harting, an analyst at Lehman Brothers.
Then there are labor costs.
Mr. Harting of Lehman said further automating the mortgage origination process means that Washington Mutual will have less need to staff up during peak times such as the periodic refinancing booms that are always succeeded by slowdowns, and layoffs.
If you can control those through much more automated systems, theres a good chance you wont have the boom-and-bust cycle, Mr. Harting said.
Robert Julavits contributed to this report
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