Posted on 08/22/2007 6:07:56 PM PDT by Vince Ferrer
CHARLOTTE, N.C. (AP) -- 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. When Clark finishes helping movers from the company's Atlanta headquarters collect computers and other property, he'll join the more than 25,000 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.
More layoffs are announced daily. On Wednesday, Lehman Brothers Holdings Inc. closed its "subprime" mortgage business, laying off 1,200 workers at 23 offices; Scottsdale, Ariz.-based 1st National Bank Holding Co. closed its wholesale mortgage unit and cut 541 jobs, and Accredited Home Lenders Holding Co. added 1,600 positions to the heap. The night before, banking giant HSBC said it would close a main financing office and cut 600 jobs.
Since the start of the year, more than 40,000 workers have lost their jobs at mortgage lending institutions, according to recent company layoff announcements and data complied by global outplacement firm Challenger, Gray & Christmas Inc. Meanwhile, construction companies have announced nearly 20,000 job cuts this year, while the National Association of Realtors expects membership rolls to decline this year for the first time in a decade.
It's 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.
"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."
For five years, the nation's housing market was booming and mortgage companies grew quickly, at times offering lucrative jobs to people with little experience. But as home values declined and interest rates rose in the past year, rising delinquencies and defaults -- especially in subprime mortgages targeted at borrowers with risky credit -- have pounded lenders who couldn't keep pace.
"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."
America's largest mortgage lender, Countrywide Financial Corp., began an undisclosed number of layoffs this week. 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.
"It's only been weeks," Challenger said. "These companies are acting remarkably quickly, stopping on a dime."
Andy Roach didn't foresee the turmoil when he joined Greenpoint in March. As late as June, the 25-year industry veteran thought the business of making "Alternative A" mortgage loans -- geared for those with slightly better credit than subprime borrowers -- was on a solid track.
But in July, he said, spooked investors stopped buying the securities the company sold by repackaging the loans. A little more than a month later, Capital One announced that Roach and about 1,900 of his colleagues across the country were out of a job.
"It was evident that it was serious," said Roach, 46, a regional manager in the Chicago suburb of Downers Grove. "When you can't sell the loans, when there's no market for those loans, it put us in a bad, bad situation."
Clark, 33, headed information technology operations for three HomeBanc offices in the Raleigh area. He had a feeling earlier this month that trouble was lurking, as the company began cutting back on perks and made some initial layoffs. On Aug. 9, HomeBanc filed for bankruptcy protection. They kept him on through the end of the month to collect equipment and "just go in and check on things."
"It was pretty much a free for all in the office, people taking paper, stuff HomeBanc wouldn't need," he said. "I don't feel like HomeBanc did anything. It was a perfect storm of a bad housing market."
Two of Clark's friends have already landed jobs with Countrywide. Another found work with an affiliate of First Magnus, and was almost immediately laid off again. Roach plans to open his own lending business, focusing on commercial business loans and originating home loans himself.
"The mortgage business isn't dead -- there's just going to be less people in it," Roach said.
Associated Press writers Mike Baker and Margaret Lillard in Raleigh, N.C., contributed to this report.
Here's an interesting link for those interested: The mortgage graveyard
knowing the MSM - the number is probably about 1/3 of that..
remember - they are wholly invested in a major economic meltdown to “blame on bush”
fyi
It's a lending bubble...
Anecdotally, I blame developers for building not too fast, but too big.
Builders would rather make 1 home priced at a million dollars, than 10 homes for $100,000 each. Understandable- less labor, less paperwork, more prestige and profit.
But they’re kidding themselves. They lose in the end, not just the buyers who can’t afford huge houses.
Lot of new mortgage companies were created also.
Interest you mentioned this. Just last week we watched a news segment in S. Cal about the high end realestate market, and that these recent events have not even put a dent in the multi-million dollar home market, as a matter of fact, they reported the very high end market is still increasing in value, and they are selling quick.
But I do agree, these home builders building these 3000 square foot McMansions for the middle class are ridiculous, as one factors in cooling and heating cost etc.
Actually, my response is pretty much, ‘so what?’.
Those that were lending too freely to the too high of risk borrower to sustain their business are now out of business. Sounds like a free market at work to me, and, we’ll all be *far* better off for it in the long, heck, even medium term.
A more entertaining site is
The Mortgage Lender Implode-O-Meter - “tracking the housing finance: a saga of corruption, stupidity, and government complicity.”
http://ml-implode.com/
Which has been cloned in a version for tracking the demise of hedge funds (see link at the mortgage site).
Many of these job losses are probably people processing junk mail to my mailbox.
ping
That site was the best form of insight during the New Century BK debacle. I was one of many that was laid off over a conference call with the CEO, who cried and hung up at the end of the call. It’s nice to know he got 5M in executive compensation after running the company into the ground.
Just the beginning.
1 in 50 Californians has a real estate license.
Actually my position is pretty close to yours, although I have been interested in this issue both as an investor in stocks and real estate. I do sympathize with people who lose their jobs, because a lot of people are not out to be crooks, but jut doing a job. I also sympathize towards other people who are getting hurt.
But this day could be fortold literally in the aftermath of the World Trade Center bombing and dot com bust, and its inevitable aftermath is worth learning from.
Wonder if if will have a snowballing effect.
These 40,000 now have no income so they will default on their mortages, etc, etc
The market says there are 40,000 too many positions here.
Good. Proper equilibrium restored.
Well, I think 9/11 was a bit early on this one... ‘04 and ‘05 was when they were giving loans out like money grew on trees in their back yard, and in CA you would go out to see a place 10 minutes after it was listed and you’d give an offer then and there for 10-15% over the asking price and still not get the home. That was a signal that speculation was overly rampant in the system, and, that the mortgage brokers were trying to sell as much as they possibly could.
Now, as the first wave of ARMs started to unlock and the foreclosures started, hedge funds started to ask themselves as to what they were buying within those packaged mortgage securities the mortgage brokers were sellings. So, they said, we won’t buy anything that is less than 90 days old - ie, we want to see at least 3 mortgage payments on each mortgage packaged into the commercial paper we’re buying.
And the jig was up. Mortgage brokers started going bankrupt all over the place as all the risk was pushed down to them in the most brutal way (free market). But the hedge funds and large financials discovred they already bought up all kinds of things that they didn’t have a clue what it was really worth - only what their models told them it was worth. The ensuing panic and drying up of liquidity in the credit markets did the rest. However, it *is* a localized phenomenon - about 5% of 1% of the entire economy, if that. So I wouldn’t stress about it much - in about a year, year and a half it’ll be the bottom of the foreclosure game and then it’ll be time to buy.
Looks like they’re reaping the seeds they’ve sown ...
If massive layoffs is what it takes to right this ridiculous wrong, so be it. The greed and lack of common sense are what is causing this implosion. Seems the lendors/banks refuse to learn from history.
I have ZERO sympathy for the foolish and greedy. Too bad some honest folks got caught up working for lenders that had no business lending. Now many will have to pay the piper.
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