After weeks of rumors and speculation, it finally happened - Washington Mutual fell and was promptly purchased by financial giant J.P Morgan.

Market Watch reports:

“Late Thursday, J.P. Morgan announced an agreement to buy WaMu’s banking subsidiary after the nation’s largest thrift was seized by the Federal Deposit Insurance Corp.

In a presentation on its WaMu acquisition, J.P. Morgan forecast a 58% peak-to-trough slump in California home prices if the U.S. enters a severe recession. In Florida, house prices could fall 64% in such a scenario, while nationwide prices could drop 37%, the bank said…

J.P. Morgan assumes cumulative losses of at least 20% on WaMu’s home equity lines of credit and home equity loans. KBW’s Cannon was expecting cumulative losses of 10%.”

No wonder WaMu was freezing HELOC lines. It looks like J.P. Morgan is expecting huge losses on the home equity lines of credit they now own.

See Also:

How a HELOC Works

WaMu Cuts HELOC Program

Tags | Heloc, home equity line of credit, J.P. Morgan, Washington Mutual