Mortgage and subprime lenders have announced nearly 70,000 layoffs in the first three quarters of 2007, according to outplacement consulting firm Challenger, Gray & Christmas Inc., which tracks company announcements of job cuts.
That’s a more than five-fold increase from the 12,874 announced job losses in mortgage lending tallied by Challenger in all of 2006.
“The heaviest job cutting has occurred over the last two months as the bottom suddenly fell out from the mortgage and subprime markets,” said John Challenger, the company’s chief executive officer, in a statement accompanying today’s release of the latest numbers.
“The dominos are likely to keep toppling as home values fall and foreclosures continue to climb,” Challenger said. “Even if the worst of the crisis is over, as some are saying, we could continue to see heavy job cuts in the financial sector through the end of the year. Additionally, we are seeing housing-related job cuts spread to other industries such as insurance, consumer product companies and retailers.”
The 51,851 layoffs in mortgage lending reported in August and September represented 82 percent of announced job cuts in the financial industry during the period.
About one in six of the 587,594 announced job cuts in all fields so far this year are related to the slowdown in the housing market and problems in mortgage lending, Challenger said. There have been 97,509 housing-related announced layoffs in the financial, construction and real estate sectors for the year to date, compared with 22,814 in all of 2006.
Although not all of them were housing-related, Challenger counted 129,927 announced job losses in the financial sector so far in 2007, including 69,664 in mortgage lending. Another 25,815 layoffs have been announced in construction and 4,803 in real estate.
On Sept. 26, discount real estate brokerage Foxtons announced it was laying off 350 of its 380 employees and considering filing for bankruptcy protection.
Challenger attributed another 4,145 announced layoffs to the housing downturn, including 1,900 in title insurance, 1,215 in consumer products, 985 in retail, and 45 in industrial goods.
Title insurer First American Corp. on Sept. 4 said that after posting a $66 million loss and laying off 600 workers during the second quarter, it planned to let an additional 1,300 employees go as part of $108 million in cost-cutting measures.
Challenger’s report doesn’t include recent announcements of layoffs by Morgan Stanley and UBS AG.
On Monday, Swiss-based UBS said it was laying off 1,500 workers in the face of $3.4 billion in losses on mortgage-backed securities and hedge fund investments.
Morgan Stanley said Tuesday it will lay off 600 employees as it restructures its global mortgage lending business under a single platform and reduces origination capacity.
The layoffs will affect about 500 employees in the U.S. and 100 in Europe — mostly in Morgan Stanley’s UK-based Advantage subsidiary.
Morgan Stanley operates three stand-alone mortgage businesses in the U.S. — subprime originator and servicer Saxon Capital, prime loan retail originator Morgan Stanley Credit Corp., and Morgan Stanley Mortgage Capital Holdings, which purchases loans from correspondent lenders.
The company said it will consolidate all of its mortgage operations into a single company with four centrally managed channels — servicing, conduit, wholesale and retail — and originate, purchase and service loans through each channel.
The consolidation will increase efficiencies and better position Morgan Stanley for growth when opportunities arise, said Tony Tufariello, managing director and global head of securitized products said in a statement. The company remains committed to building “the leading vertically integrated mortgage business” and to growing Saxon Capital’s servicing operations, Tufariello said.
Morgan Stanley’s new U.S. residential platform will be headquartered in Irving, Texas. The company will maintain existing regional operations centers in Ft. Worth, Texas; Foothill Ranch, Calif.; Riverwoods, Ill.; and Tampa, Fla. — but several other offices will be closed and their operations transferred to Texas, the company said.
In reporting third-quarter results to investors, Morgan Stanley said it lost $940 million marking down the value of mortgage loans and on closed and pipeline commitments, reducing earnings per share by approximately $0.33. The company blamed the markdowns on “illiquidity created by current market conditions.”
Other mortgage lenders recently announcing layoffs include:
- Countrywide Financial Corp. on Sept. 7 followed up previous announcements of 1,400 layoffs by disclosing plans to shed up to 12,000 additional workers. Countrywide said it expects loan volume to decline by 25 percent in 2007.
- HSBC Finance Corp. on Sept. 21 announced it would close its subprime wholesale lending channel, Decision One Mortgage, and lay off 750 workers.
- National City Corp. said Sept. 6 it would lay off 1,300 workers at National City Mortgage because of reduced originations of nonagency loans.
- On Sept. 6, Lehman Brothers Inc. announced the layoff of 850 workers as part of a global restructuring plan of the company’s mortgage origination business. Lehman said Aug. 22 it would cut 1,200 jobs as it closed down its subprime subsidiary, BNC Mortgage LLC.
- Washington Mutual said in September that it would lay off 1,000 employees in home loans, but planned to hire an equal number of retail and banking loan consultants over the next several months while increasing its consumer direct sales force.
- H&R Block Inc. revealed Sept. 11 it would lay off 575 workers from its Option One Mortgage subsidiary as tighter underwriting guidelines were expected to reduce loan origination volume to $200 million per month.
- Indymac Bancorp Inc. on Sept. 7 announced plans to reduce its workforce by 10 percent, or about 1,000 workers, as it limited loan production to mortgages eligible for purchase by Fannie Mae and Freddie Mac.
- Blaming volatility in the secondary and securitization markets, Impac Mortgage on Aug. 22 said it would lay off 350 employees. On Sept. 18 the company disclosed it had given layoff notices to another 144 employees.
- Accredited Home Lenders said in August it would fire 1,150 workers as it closed down its retail lending business and scaled back wholesale lending in an attempt to keep the company’s doors open.
- On Aug. 20, Capital One Financial Corp. announced it would eliminate 1,900 positions, most by the end of the year, as it shut down its wholesale mortgage banking unit, GreenPoint Mortgage.
- NovaStar Financial Inc. said Aug. 17 it was in the process of laying off 500 workers as it stopped buying wholesale loans.
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