HEINDRICK SO

Newly appointed CEO Robert K. Steel has quite a task ahead of him. Wachovia has continually posted dismal numbers and seems to lack an answer for the press as to it proposed gameplan.

Here are some quick numbers:

Wachovia’s falling stock Thursday suggests that some investors are disappointed the company hired a new CEO rather than negotiating a sale. The stock was recently trading at $13.29, down 7%. Year to date, the stock is down more than 65%.

And while numbers can speak for themselves sometimes. Here is why I think they are in trouble.

As a mortgage broker, Wachovia & World Savings were great portfolio lenders – they would often accept files that would be rejected or turn down by most agency lenders. It’s no secret that there hottest product was their Pay-Option-Arm. One key difference was that as a portfolio lender, their guidelines for loan-to-value ratios were alot stricter. The main thing was they often hired their own appraisers and thus shielded themselves from appraisers who would inflate values to get deals done.

Unfortunately, the declining markets has gone well past their calculated risks levels of 70-80 percent ratios.

But, this is still not the reason why they are in trouble, in my opinion.

A few days ago, Wachovia announced they were going to waive all prepayment penalites but they were also going to remove all Pay Option products. Additionaly, there is news that they are going to continue slimming down their portfolio products. Well, now all that they have left is their agency and cookie cutter loans that everyone else has been offering.  All that is left is a company that hardly distinguishes itself from its competion and unfortunately suffers with the worst of them.

Time will tell, if their portfolio calculations and business model changes will turn a new leaf. In the meantime, like I said, Robert Steel has quite a journey ahead of him.

[UPDATE 7.21.08] Well well, not one to usually say I told you so, but…

well, heres the email from a Wachovia Account Executive:

Hello Everyone,

Just got off a Sale Manager call, Wachovia has decided to discontinue the Wholesale Lending. We will accept new loan submission thru Thursday 7/24/08 til 5:00 p.m. PST.

No timeframe has been set on when deals in pipeline will need to close.

Please submit all loans asap so we can met the Thursday deadline.

Thank you for your prompt attention to this matter.

And here is another email sent by a another rep:

Dear Brokers:

We wanted to give you notice that Wachovia has made the decision today to no longer orginate loans through their wholesale channel. We will be
accepting applications for your borrowers on our portfolio and
marketable/FHA side until Friday July 25th, 2008 3pm. All loans need to
be registered, locked, and submitted in the pipeline prior to July 25th in
order to be honored. If you have been working with a borrower that you
were planning on submitting, please get the loan submitted immediately. We will be available to help you in any way possible in getting these loans
closed out in a timely manner. Once I have more details regarding our
operation closing, I will be sure to let you know.

To remind you again, our website for submission is www.wachovia.com/insite.

If you have any questions, please contact (DELETED).

Thank you for your business,

(DELETED)
Wachovia Mortgage

With foreclosures rising in California and even the Bay Area, Wachovia & World Savings had their hands deep inside of our community so it’s not surprising that they had to take these losses in their books. It’s sad to see them go, but with their past programs – again, it’s no surprise.