Washington Mutual announced a $3.5 billion write-down on its homeloan book for the first quarter yesterday as America’s largest building society agreed a $7 billion cash injection from a consortium led by TPG, the US buyout firm.

WaMu’s writedown left the group with an overall loss of $1.1 billion for the first quarter and followed a $1.87 billion deficit in the previous three months, as the housing crisis continued to hit its bottom line.

WaMu said it had agreed to sell $2 billion of newly-issued shares to TPG, formerly known as Texas Pacific, and a further $5 billion of new stock to institutional investors in the group, to shore up its balance sheet following the recent losses.

David Bonderman, TPG’s founding partner, will join WaMu’s board as part of the deal. Furthermore, Larry Kellner, a former chief financial officer at American Savings Bank and now chairman and chief executive of Continental Airlines will also join as a so-called board observer for TPG. Major investors have the right to appoint a board observer, who can attend and participate in meetings of the board of directors, but are not part of the board and cannot vote.

WaMu said it will also save $490 million a year by reducing its quarterly dividend from its most recent rate of $0.15 per common share, to $0.01.

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