Golden West Financial Sells Out to Wachovia

Golden West Financial will sell out to Wachovia as the US Mortgage industry is poised to see a consolidation as the volume of mortgages slows down after 5 boom years. Golden West Financial is solely focused on mortgages and as such did well during the past few years, but as  Herbert Sandler, co-chairman of Golden West states, We’ve always been aware that being a monoline company had extra positives and extra negatives,” he said Monday. “There were inherent weaknesses in our strategy.”

As the market is turning down, these single play mortgage companies are going to look to be consolidated into the larger banking institutions. Smart business if you ask me.

Mortgage banks have spent the last five years in boom mode, benefiting from historically low interest rates that drove more people to take out first mortgages, refinance existing loans and take out home equity lines. But rising interest rates have threatened to end the party.

The Mortgage Bankers Association estimates that this year, even with interest rates stabilizing, the volume of new mortgage loans will drop 14% from the $2.7 trillion logged last year.

Herbert Sandler, the colorful and blunt co-chairman of Golden West, said his decision to seek a merger partner was in no way meant to signal his view that the mortgage business is going down the drain. Rather than concerns about loan volumes coming off the boom times, Sandler pitched his desire to diversify. via Forbes