SEATTLE - Washington Mutual Inc. said Friday that the weak housing market and the recent mortgage crunch will lead to a 75 % drop in its third-quarter net income, making it the latest financial institution to warn investors that it took a major hit over the summer. WaMu, the nation's largest savings bank, reported net income of $748 million in the third quarter of 2006, meaning third-quarter 2007 net income is likely to be somewhere around $187 million. Washington Mutual said its loan loss provision for the quarter will total $975 million. The provision exceeds net charge-offs - loans written off as having no chance of being recovered - by $550 million. Loss provisions, on top of paying current charge-offs, are used to cover future losses. The company will also write down the value of various loans and portfolios by about $410 million. Washington Mutual will write down by $150 million the value of $17 billion in loans that it was originally intending to sell, but instead moved to its investment portfolio after it could find no buyers in the secondary markets. Another $150 million in writedowns will be taken in the company's trading securities portfolio. Washington Mutual will also take $110 million in writedowns on investment grade mortgage-backed securities it is holding to sell to investors.
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