Two mortgage lenders — Delta Financial Corp. and Impac Mortgage Holdings — announced layoffs totaling 650 workers Wednesday, adding to the tally of more than 13,000 job cuts in the last week.
Delta Financial Corp. announced it has cut its workforce by 20 percent, laying off 300 workers as it closes wholesale offices in Florida, Texas and California.
The Woodbury, N.Y.-based mortgage lender, which originates and securitizes nonconforming loans for sale in the secondary market, said the rapid deterioration of credit markets “has caused issues in our sector that are beyond our control.”
Impac Mortgage also blamed volatility in the secondary and securitization markets, “which has significantly limited the origination of nonconforming residential mortgages,” for layoffs of 350 employees.
The Irvine, Calif.-based lender recently reported that it suffered $152 million in losses during the second quarter and was facing margin calls from creditors that provide funding for its loans.
In its most recent quarterly report to investors, Delta Financial said profits fell to $777,000, compared with $7.2 million during the same quarter a year ago.
The company blamed the precipitous drop in net earnings on a 39 percent increase in provisions for loan losses, to $66.9 million, and increased expenses from a 14 percent growth in workforce as the company expanded its originations.
Although Delta Financial boosted loan originations during the first half of the year by 35 percent to $2.6 billion, it has been forced to cut back on adjustable-rate mortgages and to hold more loans in its portfolio.
About 5 percent of the loans the company originated in the first six months of 2007 were adjustable-rate mortgages (ARM), compared with 15.4 percent during the same period last year. Delta Financial stopped making 2/28 hybrid ARM loans during the second quarter, and more recently eliminated 3/27 ARM loans.
The company held $7.8 billion in loans for investment as of June 30, compared with $6.5 billion at the end of 2006. About 6.2 percent of loans held for investment were delinquent by 90 days or more, and the value of real estate owned properties acquired by the company through foreclosure rose to $46.2 million, up from $29.6 million at the end of 2006.
Delta Financial warned investors that the company had received “substantial margin calls” from warehouse lenders who accept loans Delta Financial is attempting to securitize as collateral.
Delta Financial had $500 million warehouse credit facilities with Bank of American, Deutsche Bank, Citigroup, RBS Greenwich and JPMorgan Chase.
A half-dozen other lenders have also announced layoffs of more than 13,000 employees in the last week.