Seattle-based Washington Mutual Bank has surpassed Fleet Bank as the top mortgage lender in the state and is making plans to expand its market share throughout New England. The fifth largest mortgage lender in the country, Washington Mutual has grown in Massachusetts by offering niche loan products and through wholesale lending.

Washington Mutual started last year in 10th place among mortgage lenders in the state. By October it had garnered the highest market share in the state, edging out competitors like Fleet Bank, Norwest Mortgage, North American Mortgage Co. and Bank of America. The bank has held the top position through this year, gaining a 3.5 percent market share, according to data from Warren Information Services, a sister company of Banker & Tradesman.

“I would like to see us double our market share over the course of the next two to three years,” said Brad Blackwell, senior vice president for retail lending. “We plan to increase our presence nationwide and, of course, in Massachusetts in a major way.”

Massachusetts was the first East Coast market where the bank took the top market share. It followed late last year with Connecticut. In addition to the New England states, Washington Mutual has a strong presence on the West Coast and is the top mortgage lender in Illinois and Utah. The bank makes mortgage loans in 29 U.S. states and Washington, D.C., and has 2,000 offices across the county. The bank traces its roots to 1889, when it was founded to help the city rebuild after the great Seattle fire.

With $188.6 billion in assets, Washington Mutual is similar in size to Boston-based Fleet, which has $187 billion in assets. But from January 2000 through mid-April, Washington Mutual outpaced Fleet, which came in second place with a 2.9 percent share of the Massachusetts mortgage market. Washington Mutual closed 696 mortgages with a total value of $132.3 million in the period, compared to Fleet’s 574 loans worth $89.6 million. The Seattle bank made larger mortgage loans, with an average loan size of $189,958, while Fleet’s average loan size was $156,238.

Fleet Bank has been occupied this year with its merger with BankBoston and the subsequent branch divestiture. In the past Fleet’s mortgage business has slowed after major mergers. But Washington Mutual’s Blackwell said his bank moved ahead of Fleet because it focuses primarily on the mortgage business.

“With many of the other major lenders, the mortgage lending division is a subsidiary of a commercial bank and they have other priorities,” Blackwell said.

Mortgage lending is Washington Mutual’s primary focus, Blackwell said. The company’s product lines include consumer and commercial banking, mutual fund management, securities brokerage, property and casualty life insurance sales and underwriting for insurance annuities.

Washington Mutual serves retail customers at home lending centers in Newton Corner, Quincy and Reading. Residents in the northern part of the state can visit an office in Nashua, N.H., while those in the southern part of the state can go to the Cranston, R.I., location. The company has a wholesale office in Braintree.

In addition, Washington Mutual completed the acquisition of Long Beach Mortgage Co. in October. Long Beach Mortgage has a regional office in Hingham that serves Massachusetts.

Washington Mutual closed 2,310 mortgages in Massachusetts last year, totaling $427.3 million. The average size of the loans was $184,995.

The bank came in fifth in year-end rankings of mortgage lenders, with a 2.3 percent market share. Norwest finished the year as the state’s top lender, with a 3.6 percent market share. It was followed by Fleet and North American Mortgage Co., which each took a 2.9 percent share of the market, and Bank of America which garnered 2.4 percent of the market.

The company plans to expand its presence in the Bay State, but will not open new locations for another year or two, Blackwell said. Instead, Washington Mutual will hire mortgage originators for its existing offices. The company has 25 originators and a total of 125 employees in the state. The company processes and underwrites loans locally, allowing the national company to tailor loans to its local markets.

The company has stepped up its marketing with billboards and radio advertisements in the state. The bank is building a new Web site for its mortgage business that will target select cities, including Boston.

“You will see a lot more of Washington Mutual as time goes by,” Blackwell said.

Call to ARMs
Washington Mutual’s mortgage business is split between retail and wholesale mortgages. Each comprises about half of the bank’s mortgage volume. Purchase mortgages account for 70 percent of the volume, and refinances make up 30 percent.

Washington Mutual is known for its offering of adjustable-rate mortgages, which have been popular on the West Coast. Demand for adjustable-rate mortgages has increased as the Federal Reserve has continued to raise interest rates. The bank is one of a few lenders to offer an ARM with a low down payment and an interest rate that adjusts to the index of the monthly treasury average, Blackwell said.

In the first quarter of this year, Washington Mutual made $8.5 billion in single-family residential loans, excluding construction loans. Of that amount, 91 percent were adjustable-rate mortgages, up from just 54 percent in the first quarter of 1999.

“They’re a huge ARM lender,” said Maureen R. Elliot, chairman of the Massachusetts Mortgage Bankers Association. “They have a lot of different types of ARM products that are unusual. More people are looking at adjustable rate products. It really is an adjustable-rate market.”

The lender also offers one-year, three-year and five-year ARMs with rates that adjust annually after the initial fixed period. When interest rates plunged in 1998 many consumers refinanced their homes at the low rates with fixed-rate mortgages. But as rates have climbed to new levels consumers have been attracted to adjustable-rate mortgages that may save on interest in the long run.

“Sometimes the most sophisticated borrowers are attracted to our products,” Blackwell said. “Increasing interest rates have caused the consumer to shift more from a fixed-rate product to an adjustable-rate loan.”

Washington Mutual has supplemented its three Massachusetts offices with wholesale lending, and has recently increased its wholesale presence in the state. Mortgage brokers can make loans through the bank, and the loans close under Washington Mutual’s name. Continental Funding Corp. in Stoughton brokers loans with the bank, said President Howard Miselman.

“There are lots of wholesalers and investors that we can choose from, and they’re fairly new to the market, relatively speaking,” said Miselman, who is also chairman of the Massachusetts Mortgage Association. “For them to make inroads with companies like myself and others, [they] have to do things either better or different.”

Washington Mutual has held seminars to inform mortgage brokers of their products.

Because mortgage lending is Washington Mutual’s largest business, it could become vulnerable as interest rates rise. While the Federal Reserve has raised interest rates to fend off inflation, the purchase market could suffer if consumer confidence falls and consumers decide it’s not a good time to buy a home.

Blackwell said he expects the purchase mortgage business to slow, but that business will not drop dramatically.

“That can be healthy in that there’s been extraordinary demand and very little supply,” he said. “A slight slowing can be healthy for this market. We will hope that interest rates won’t go high enough to completely choke it off.”

Seattle Bank Muscles Into Mass. Market

by Banker & Tradesman time to read: 5 min