National City Corp., Countrywide and Lehman Brothers announced more than 3,000 layoffs today and Wednesday, as mounting losses in mortgage lending force companies to cut costs.
National City Corp. said today it was laying off 1,300 workers at National City Mortgage as part of “aggressive steps” to respond to changing conditions in the mortgage markets, which could also include writing down the value of loans it’s been unable to sell to investors by $30 million.
The layoffs include 800 job cuts resulting from reductions in the origination of non-agency eligible loans at National City Mortgage, and expected lower demand for such loans in the future. Those layoffs were initiated in early September, the company said.
Another 500 positions are being cut following the merger of the company’s National Home Equity unit into National City Mortgage in August, and the suspension of broker-sourced originations of home equity loans.
National City said it’s also evaluating whether it will reclassify loans that it was planning to sell to investors as “held for investment,” because of continued lack of demand in secondary mortgage markets. Some held-for-sale home equity loans and lines have already been transferred into the company’s portfolio at fair value, and the status of other Alt-A and closed-end second mortgages could be reclassified. The company put the potential for fair-value write-downs at around $30 million.
The layoffs, write-downs and other charges related to National City’s mortgage banking business are expected to total $200 million before taxes in the third quarter. The mortgage banking business had net income of $69 million for the first half of 2007, and is expected to be “modestly profitable in the fourth quarter,” the company said.
Also on Thursday, Lehman Brothers Inc. announced it would lay off 850 workers worldwide as part of a restructuring plan for its residential mortgage origination business.
Lehman Brothers, which last month announced the closure of its BNC Mortgage LLC subsidiary, said “rescaling” its U.S. and United Kingdom operations and closing its Korean mortgage business would cost $20 million but leave the company “sized correctly for the current environment and positioned for long-term success.”
The company said its residential mortgage origination and servicing businesses in the U.S., Japan and Europe — including Aurora Loan Services, Libertus and ELQ Hypotheken — will operate under the name Lehman Mortgage Capital.
Countrywide Financial Corp. said Wednesday it cut 900 jobs, mostly in its mortgage production divisions.
Most of the jobs eliminated — about 380 — were in California, with another 225 in Florida, 150 in Texas and 40 in Arizona, the company said.
CNBC and National Mortgage News have reported that Countrywide has plans to lay off 6,000 to 10,000 employees.
The Calabasas, Calif.-based company last month announced 500 layoffs in its Full Spectrum Lending division, which handles Alt-A loans, and in the subprime unit of its wholesale lending division.
Up to that point, Countrywide had widely publicized an effort to expand its workforce in an attempt to pick up market share from other troubled lenders
At the end of July, Countrywide reported total employment in loan originations was up 6.4 percent from the year before, to 34,326, while employee headcount was up almost 10 percent, to 61,586.
In announcing the latest layoffs, Countrywide said the company “has always aligned its organization to best serve the needs of its customers and reflect the market and economic conditions in which we operate. While as a matter of policy we don’t comment on speculation, any further changes to the Countrywide organization will reflect our ongoing strategy to align our business to the marketplace.”
