Wachovia to exit wholesale mortgage business

The nation's fourth-largest bank will no longer offer mortgages through brokers starting July 25.

July 22, 2008: 6:52 AM EDT

CHARLOTTE, N.C. (AP) -- Wachovia Corp., the nation's fourth largest-bank, said Monday that it is leaving the wholesale mortgage lending business.

Beginning July 25, the company will no longer offer mortgages through brokers, joining other lenders making similar moves to exit the troubled sector. Rival Bank of America (BAC, Fortune 500) got out of the business several months ago.

Wachovia didn't disclose how many jobs will be cut as a result of the change. More details are expected Tuesday when the Charlotte, N.C.-based bank releases its second-quarter earnings.

Wachovia (WB, Fortune 500) spokesman Don Vecchiarello said in a statement that the company "recognized some opportunities to re-position our business" given the current market conditions.

"We believe it is important to focus on serving the needs of customers who have relationships with the bank, and who are located in geographies where Wachovia franchises are located," Vecchiarello said.

Earlier this month, Wachovia hired Robert Steel, former Treasury Undersecretary and Goldman Sachs Group Inc. executive, as its new CEO. Within a week of being on the job, the bank's shares tumbled to a new 17-year low.

Steel succeeds Ken Thompson, a chief executive officer who was ousted by the bank's board in June after a series of missteps, including the decision to buy mortgage lender Golden West Financial Corp. in 2006 for roughly $25 billion at the height of the housing boom.

That deal left Wachovia with a deteriorating $120 billion portfolio of Pick-A-Payment loans, Golden West's specialty, which let borrowers skip some payments. Shares of Wachovia dropped more than 5% in after-hours trading following the announcement.

They closed the regular trading session up 21 cents or 1.6% at $13.18, near the bottom of their 52-week range of $7.80 to $53.10.

Big banks, such as Bank of America and National City Corp., have stopped making loans through brokers entirely, relying instead on their loan officers. National City (NCC, Fortune 500) said it was forced to do so by a continuing downturn in loan demand, while Bank of America said it saw better "long-term opportunity" in working through its own loan officers.