Loan firms lay off 24,000 since Aug. 1

0 Comments | Deseret News (Salt Lake City), Aug 23, 2007 | by Combined Wire News Services

At the North Carolina offices of mortgage lender HomeBanc Corp., Archie Clark is the only employee left. But in a few days, he'll be gone, too.

"It's pretty much a ghost town over there," Clark said. "Somebody went in and took the furniture from the lobby. I don't know who did that. I put some of the other stuff in the back and locked it up."

When Clark finishes helping movers from the company's Atlanta headquarters collect computers and other property, he'll join the more than 24,000 workers nationwide who have lost jobs in the financial services industry since the beginning of the month -- with more than half coming since last Friday. With few exceptions, the cuts are the direct result of woes in the nation's housing market as a credit crunch started by subprime mortgages shrank demand for loans and left companies unable to fund themselves in the debt markets.

Since the start of the year, more than 38,000 workers have lost their jobs at mortgage lending institutions, according to recent company layoff announcements and data compiled by global outplacement firm Challenger, Gray & Christmas Inc. making it an employment collapse that threatens to rival the massive layoffs in the airline industry that followed the Sept. 11, 2001, terrorist attacks, when some 100,000 employees lost their jobs.

In Utah, the impact has been on employees working in the local offices of national companies who have recently shuttered their doors.

"There are, in the wholesale market, a lot of people looking for jobs right now," said John Norman, executive director of the Utah Mortgage Lenders Association. "I don't know how many jobs have been lost in Utah, but I do know that most of the jobs have been lost in the wholesale market."

National companies with offices in Utah include: GreenPoint, Capital One's wholesale mortgage arm; Aegis; American Home Mortgage, whose wholesale arm was American Brokers Conduit (ABC); and First Magnus Financial Corp., which filed for bankruptcy this week.

In some cases, Norman said, the support workers, mainly underwriters and account executives, are landing at other, still operational Utah offices.

"As always, there are winners and losers when the market changes," he said. "Those companies that are still in business all tell me that their volume is up."

Still, experts say, things will likely continue to get worse for workers in the immediate future.

"It's far from over," said Bart Narter, a senior analyst with Celent, a Boston-based financial research and consulting firm. "The subprime lending collapse will continue to ripple through the financial sector."

America's largest mortgage lender, Countrywide Financial Corp., began an undisclosed number of layoffs this week has been scurrying to secure additional lines of credit and investments.

Last week, Arizona mortgage lender First Magnus Financial Corp. shut down its operations and laid off nearly 6,000 workers. On Monday, Capital One Financial Corp. said it would shutter GreenPoint Mortgage, its wholesale mortgage banking business, and lay off 1,900 employees.

"These kind of mortgage lenders just sprung up like mushrooms and grew like men," said John A. Challenger, chief executive at Challenger, Gray & Christmas. "They staffed up, and now you have a bust. It's only been weeks," Challenger said. "These companies are acting remarkably quickly, stopping on a dime."

Continued layoffs and closures were announced on Wednesday:

Accredited Home Lenders

Accredited said it will close its 60 retail branches and five support centers within two weeks as well as halting U.S. wholesale mortgage applications from brokers. The job cuts will shrink Accredited's work force to 1,000 from 2,600.

The company said the reductions are necessary to stay in business until it can begin lending again.

"These difficult decisions were made out of necessity in light of the continued and widely publicized turbulence in the mortgage and financial markets," Chief Executive Officer James Konrath said in the statement.

Accredited, whose planned sale to Lone Star Funds collapsed this month, said in a statement today it will shut more than half of its mortgage operations and fire about 1,600 people.

Countrywide Financial

Struggling mortgage giant Countrywide Financial Corp. was thrown a financial lifeline Wednesday by Bank of America Corp.

Calabasas-based Countrywide announced that BofA had made a $2 billion investment in the company in the form of preferred stock. Countrywide will pay BofA an annualized yield of 7.25 percent on the investment.

H&R Block

H&R Block, based in Kansas City, Mo., said in a statement today that Block Financial drew down $200 million on Aug. 16 and then repaid that loan when it borrowed $850 million on Aug. 20.

"We have decided to substitute this more stable source of funds to support our short-term needs," said Bill Trubeck, executive vice president and chief financial officer at H&R Block.

More than 20 companies have been shut out of the market for asset- backed commercial paper, which is short-term debt maturing in 270 days or less, as investors balked at buying debt backed by mortgages.