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WaMu Slashes Home Loan Business

Among the steps taken by the savings and loan: cutting more than 3,100 jobs and discontinuing all subprime mortgage lending

The Associated Press

Washington Mutual (WM), the nation's largest savings and loan, said Monday problems in the mortgage and credit markets are forcing it to close offices, slash over 3,100 jobs, and set aside far more than expected for loan losses in its fourth quarter.

The company also said it was slashing its dividend 73 percent. Additionally, WaMu announced a $2.5 billion offering of convertible preferred stock.

The company said it now expects to set aside between $1.5 billion and $1.6 billion for loan losses in its fourth quarter. That estimate is about twice the level of expected fourth-quarter net charge-offs, WaMu added.

The company said higher loan loss provisions could continue through the end of 2008.

WaMu said it will also cut its home loans business by discontinuing all remaining lending through its subprime mortgage channel, closing about 190 of 336 home loan centers and sales offices, getting rid of about 2,600 home loans positions—or about 22 percent of its home loans staff—and eliminating 550 corporate and other support jobs.

The Seattle company said it will also lower its quarterly dividend to 15¢ per share from its most recent dividend of 56¢ per share.

WaMu is discontinuing all subprime mortgage lending.

WaMu shares rose 82¢, or 4.3%, to close at $19.88. In after-hours trading, the shares fell more than 8% following the company's announcement.

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