Bad Credit Mortgage Troubles, Industry Layoffs Spreading

The bad credit mortgage lending industry’s deep freeze has sent chills over the rest of the industry as layoffs continue to spread to those who issue home loans to the more credit-worthy borrowers.

But even as smaller players shed staff, the industry’s largest players such as Wells Fargo Home Mortgage and Countrywide Mortgage are stepping up their hiring as they seek to grab marketshare amid the carnage.

Wells has two dozen mortgage-related openings in the Bay Area alone. And Countrywide Mortgage said it will hire 2,000 sales people this year as part of a plan to open 100 branches around the country.

But others are quietly cutting staff to cope with the slowdown as fewer mortgages are made due to tighter lending standards and fewer home sales and mortgage refinancing.

GreenPoint Mortgage, a unit of Richmond, Va.-based Capital One, laid off 70 employees, including nine at the company’s Novato headquarters.

About 20 percent of GreenPoint’s 2,800 employees works in Marin County.

The company makes so-called “Alt A” mortgages, which go to borrowers that fall between prime and subprime. A big part of the business is making jumbo loans, those that exceed Freddie Mac and Fannie Mae’s loan limit of $417,000.

Coastal California is a big market for jumbo mortgage loans.

Another mortgage broker hard hit by the downturn is Lending Tree, which funnels home loan applications to lenders across the nation. The Charlotte, N.C., company said this month it will lay off 440 workers, or 20 percent of its staff.

San Rafael mortgage broker Paul Financial let go of 36 employees this month. Of those, 25 worked in the San Rafael headquarters. The company’s workforce totals about 180 employees.

Peter Paul, president of Paul Financial, said the company won’t make money this quarter given the drop-off in lending and the decision to set aside reserves for loans that might go bad down the road.

Paul said the layoffs were due in part to his zigging while the industry zagged. Last fall he revved up in anticipation of more growth.

That was shortly before the implosion of the subprime mortgage industry, which lends to those with tarnished credit records. Loose lending in the Alt-A mortgage and other segments of the market is now taking its toll.

“Some lenders were really making Alt-B loans,” Paul joked.

SOURCE: MSNBC