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Updated from 9:51 a.m. EST

Is the party over for mortgage lenders?

The question has been asked for months, and now bears can point to drastically reduced guidance issued Tuesday by one of the industry's biggest players,

Washington Mutual

(WM) - Get Waste Management, Inc. Report

, which said volume fell off the table between the third and fourth quarters.

The Seattle-based lender and loan servicer said lower volume and stiffening competition will result in a reduced fourth-quarter gain from mortgage loans and overall 2003 earnings of $4.15 to $4.25 a share. That's up from 2002's earnings of $4.02 a share, but well off the Thomson First Call consensus estimate of $4.42.

The news sent WaMu's shares down $3.07, or 7%, to $40.78 and took bites out of many mortgage players.



was down $5.40, or 5%, to $102.90, while

Wells Fargo

(WFC) - Get Wells Fargo & Company Report

was down 63 cents, or. 1.1%, to $56.68,

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H&R Block

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was down 60 cents, or 1.1%, to $52.13, and

Golden West Financial


was down $2.07, or 2%, to $99.48.

Washington Mutual said mortgage volume in the fourth quarter will be half what it was in the third, while pricing pressures are eroding the profitability of the loans that are made. The company's average gain per loan, which was a fat 47 basis points in the second quarter, shrunk to as few as 10 basis points in the fourth. A greater emphasis on adjustable-rate mortgage originations will also afflict margins.

The company said the uncertain outlook for the mortgage market is forcing it to widen its 2004 earnings guidance to $4.30 to $4.80 a share, compared with the analyst consensus estimate of $4.75.

The apparent end of the interest rate reduction cycle authored by the

Federal Reserve

over the last two years has crimped mortgage volume nationwide as consumers stopped seeing advantageous terms upon which to refinancing their existing home loans.

"Now that the mortgage market has clearly slowed, we are adjusting our business to adapt to the new realities of the current environment," WaMu said. "We are taking steps to substantially reduce operating costs and streamline and improve operations to drive efficiency, enhance customer service and continue the growth of our leading national franchise."

Those steps have included job reductions that totaled 4,500 between August and November. It expects to cut another 900 positions before the end of next year's first quarter.

The cuts were mainly administrative and support contractors. The number of mortgage loan salespeople has grown 35% so far this year, and employment in its retail banking branches and commercial banking business continues to grow.