Washington Mutual, which is based at this building in Seattle, is closing two of its local retail operation centers, which will eliminate 165 jobs in Massachusetts.

Seattle-based Washington Mutual, a national lender with $343.12 billion in assets, plans to close two of its Massachusetts retail operation centers, which will result in the loss of 165 Bay State jobs.

The 100 employees at the Dedham office and the 65 employees at the Quincy office were informed last Wednesday morning that they would be out of work within a matter of months.

The two Massachusetts locations are among the 10 processing offices set to close nationwide in the next two to four months, said Tim McGarry, spokesman for Washington Mutual.

“Both [Massachusetts locations] are offices that supply administrative support,” he said. “What we are doing is consolidating. The jobs will be eliminated. This is a job elimination.”

Washington Mutual will retain 16 operations centers nationwide, but about 2,500 jobs will be cut.

According to Jim Jones of First Wellesley Consulting, the closings should not come as a surprise to industry watchers such as himself. Jones, who follows national mortgage trends, said Washington Mutual began aggressively acquiring smaller financial institutions more than 10 years ago.

“They embarked upon one of the most aggressive acquiring sprees I’ve ever seen in the industry, said Jones. “They literally had too many locations for the processing of loans. It wasn’t a surprise. It was certainly in line with their overall strategy.”

James Dougherty, executive director of the Massachusetts Mortgage Association, said any company that has expanded as rapidly as Washington Mutual will have to contemplate restructuring due to overlap in services or the market.

McGarry said the consolidation of Washington Mutual’s administrative support operations coincides with strategies that were presented to investors last November. The plan is to consolidate and move back-office functions to locations that will be cheaper to run, which also includes offshore locations. McGarry said the offshore workforce is expected to grow from 600 to 6,000. He said the strategies are cost-saving measures intended to help the large lender thrive in the industry, which is currently experiencing a decrease in mortgage volume.

“We are in a very tough time for mortgage lending. That puts an enormous pressure on mortgage companies to reduce their fixed costs. What Washington Mutual is doing is entirely consistent with what the other large lenders are doing [as far as offshore outsourcing],” said Jones. “It is to reduce the cost of doing business.”

Jones said the business model of mega-lenders requires them to become more cost-efficient to survive. He said there is a growing trend among the mega-lenders to outsource parts of the workload to other countries.

Washington Mutual is downsizing its domestic back-office support but plans to increases the frontline of its corporation by adding between 150 and 200 new retail banking stores this year, according to McGarry. He added that the changes are setting the stage for new growth.

“This Â… does not affect the home loan centers,” he said of the customer-facing loan offices. Although Massachusetts has eight of Washington Mutual’s home loan centers, McGarry said none of the new retail banking sites is expected to be opened in the Bay State as part of the planned expansion.

‘It Fits Perfectly’
McGarry said he would not discuss specifics as to why the two back-office operations in Massachusetts were selected to be shut down. However, he said the amount of time left on office leases and their proximity to other locations and departments doing similar work were factors in the decisions.

Jones said the cost of leasing space may make the back-office operation centers in Massachusetts more vulnerable to closures during corporate restructurings or cutbacks.

“There are other low-cost states, and there are other low-cost countries,” he said.

On July 22, 2004, Washington Mutual announced plans to close non-signature mortgage offices, resulting in the elimination of 2,500 positions by the end of 2004. The company also announced a plan to eliminate $1 billion of annual non-interest expense by the second quarter of 2005.

On Jan. 18, Washington Mutual also announced the closing of a call center that resulted in the loss of 1,000 jobs in California.

“The most recent announcement is consistent with what they started doing in 2004. This latest announcement is one of a series of announcements they’ve made in the last two years,” said Jones. “It fits perfectly within their strategy to be a low-cost mortgage provider.”

While large national lenders can cut back overhead costs – passing a portion of the savings onto consumers – smaller firms may not have the same options. Jones said more acquisitions and mergers are expected throughout the industry.

Jones said smaller lending companies are also expected to service fewer loans in the future. The local and regional players likely will sell their loans to the larger institutions after they are originated, he said, adding that it will be a way for the smaller companies to still offer competitive rates.

Some of that activity already can be seen in the marketplace, according to Jones.

Washington Mutual currently has more than 2,600 retail and commercial banking, mortgage lending and financial service offices nationwide.