Credit Crunch: 15,000 Mortgage Workers Get Booted

Last week’s unexpected Labor Department announcement of a loss of 4,000 jobs, which sparked fears of a recession, was followed by an overwhelming amount of layoffs across the mortgage industry.

“The driving force behind the layoffs is the anticipation of permanently lower volumes,” says Sam Garcia, publisher of, an online news publication for the mortgage industry.

“The lower volumes, however, are the result of fewer available loan programs and borrowers that have become too nervous to utilize adjustable-rate mortgages, hybrid ARMs, and anything that smells like an exotic loan,” says Garcia.

Adding to the growing list of workers affected in the financial services industry, more than 15,000 mortgage professionals are facing a new round of layoffs:

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  • Countrywide Financial is laying off 12,000 jobs, or about 20%, over the next few months. Those affected are primarily part of the riskier sub-prime lending operations, production divisions, and general/administrative support areas. Still, Countrywide defended itself as “the very best mortgage company on the face of the earth” and made mention of an online rebuttal rebuking claims made by the New York Times. In a client letter, the company’s president and chief executive officer explained the company is “bullish on our future,” and is “providing job placement services for displaced employees, and we will work to find them opportunities both inside and outside the company.” (Not affected: banking operations, insurance businesses, and loan servicing operations. In addition, the distributed retail unit of its consumer markets division will continue to grow its sales force.) Countrywide also said it is moving aggressively into conventional home loans, but Garcia contends that all the players, prime and nonprime, indicate they will now focus only on conforming originations (i.e., loans that can be bought by Fannie Mae or Freddie Mac). “This will make the conforming field more crowded and certainly lead to more layoffs at the weakest players,” says Garcia.
  • IndyMac Bancorp is laying off about 1,000 jobs, or 10%, over the next several months. In a shareholder letter released Friday, the Pasadena, California-based company said it is taking “steps to right -size our organization” with a voluntary severance program and additional involuntary layoffs. The company says “one positive outcome of the mortgage market disruption” is its new growth of almost 1,500 employees in the retail lending group.
  • National City Corp. is laying off 1,300 workers. At the company’s annual analysts’ conference on Friday, it announced the elimination of approximately 800 positions in the mortgage unit and related support functions. Due to the suspension of broker-sourced originations of home equity loans and merging the National Home Equity unit into National City Mortgage in August, the company will also lay off another 500 positions.
  • Lehman Brothers is laying off 850 workers, or about 3%. This primarily affects workers at its Littleton, Colorado-based Aurora Loan Services division. The company also says it plans to consolidate U.S., Japan, and European businesses into the new Lehman Mortgage Capital, and will also close its Korean mortgage business. In August, the company slashed 1,200 jobs, or 4.2%, after closing its sub-prime division.
  • NovaStar Financial is laying off 275 of its 400 employees in retail lending operations over the next two months. NovaStar will close 12 retail origination offices, concentrating retail activities in four offices, including processing centers in Kansas City, Missouri, and Columbia, Maryland. NovaStar expects to have approximately 600 employees, overall, after this reduction in workforce. The company’s servicing organization was not affected by the reduction.

Garcia says he sees a “massive shift” in mortgage employment, with big reductions in production staffs and increases in servicing personnel.

“Geographically, we’ve seen a migration from California to lower-cost states like Texas ,” he says.

Although he will not comment on broader economic forecasts, such as a recession, he says he doesn’t see an improvement in the mortgage market until 2009.

Elaine Rigoli has nearly 15 years of experience managing content and community for various B2B and consumer websites. Elaine has written thousands of business and technology articles and has been quoted in The Wall Street Journal and eWeek, among other publications.


1 Comment on “Credit Crunch: 15,000 Mortgage Workers Get Booted

  1. Can someone please provide any information on recruiting agencies or companies that are willing to assist or possibly hire a person with a mortgage and banking background?

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