Newspaper article The Florida Times Union

Washington Mutual Suffers Post-Dip Depression

Newspaper article The Florida Times Union

Washington Mutual Suffers Post-Dip Depression

Article excerpt

Byline: Mark Basch

If you're like me, you were probably scratching your head when you were told that last Tuesday's market slide was caused by delinquencies in subprime mortgage loans.

Obviously, the mortgage news affects finance and real estate companies and has a bearing on the overall economy. But why would that news cause investors to sell, for example, FPIC Insurance Group Inc., which fell $1.14 on Tuesday? Do delinquent loans lead to increases in medical malpractice insurance claims?

But the news does have a direct impact on Seattle-based Washington Mutual Inc., one of the nation's largest mortgage lenders, with a big mortgage operation in Jacksonville.

The Mortgage Bankers Association said Tuesday that the delinquency rate on subprime loans rose from 12.56 percent to 13.33 percent in the fourth quarter. Keefe Bruyette & Woods analysts Frederick Cannon and Robert Bohlen expressed concern about Washington Mutual's prospects.

"We met with WM management today and had extensive discussions concerning their subprime mortgage business. Our bottom line take away is that subprime mortgages will be a meaningful drag on earnings during the next two to three quarters," the analysts said in a research note.

The analysts said that only 9 percent of Washington Mutual's loan portoflio is subprime, but that represents $20.8 billion.

Washington Mutual fell $2.11 to $39.79 Tuesday and dropped as low as 38.73 Wednesday, its lowest level since October 2005.


With increasing signs that the deal would be rejected, Clear Channel Communications Inc. last week postponed its special shareholder meeting to vote on a proposed buyout by private investors. The meeting, originally scheduled for this Wednesday, is set for April 19.

Many large shareholders are expected to reject the deal because they feel the $37. …

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