Struggling savings and loan giant Washington Mutual announced Wednesday that they will no longer be making payments on their mortgage for WaMu Center, the company’s 42-story downtown Seattle headquarters.
The decision by WaMu follows in the footsteps of an increasing number of distressed homeowners that have walked away from their mortgages as the real estate market continues to experience record declines across the country.
“We used a zero-down option-ARM loan to finance the purchase of WaMu Center in 2006, and since our rate adjusted earlier this year, our payments have nearly doubled,” said CEO Kerry Killinger. “We had no idea that it would skyrocket like that.”
WaMu executives explored other options, such as selling the building or attempting to rent it out, but with the tanking real estate market they realized that walking away was by far the most financially sound decision. “It’s already worth about 10% less than we paid in ’06,” Killinger said, “so once you figure in the cost of selling, we would be out nearly 20%.”
“Walking away from a mortgage is never an easy decision,” explained Killinger, “but this move simply makes the most financial sense for us. We’re already losing billions of dollars in this housing bust, so we have to take action wherever we can to avoid even more extensive losses.”
WaMu will make the most of the drawn-out foreclosure process by continuing to occupy the building after they stop paying the mortgage, relocating only once they are legally forced out. When the foreclosure process is complete, they will move their operations to Lynnwood. “We found a nice little apartment building up there, with affordable rent and even a pool,” said Killinger. “It will be a bit cramped, but it’s a roof over our heads.”
The foreclosure will be a black mark on WaMu’s credit report for the next seven and a half years, but executives consider that to be a reasonable exchange for escaping the crushing financial burden of monthly payments that had recently exceeded 75% of the company’s gross operating income.
“All of our competitors in the banking industry were moving into bigger, fancier headquarters in 2005 and 2006, and the way prices just kept rising, we figured it was a can’t-lose idea,” Killinger explained. “Now we just want to put this all behind us.”
“In hindsight, we probably should have settled for a more modest headquarters that we could afford using conventional financing,” he said.