Mortgage Lenders Countrywide, IndyMac Announce Layoffs
Saturday, September 8, 2007
Countrywide Financial and IndyMac Bancorp, two of the nation's largest mortgage lenders, announced plans to sharply reduce their workforces in coming months as they try to cut costs in a turbulent mortgage market.
Countrywide, the nation's biggest mortgage lender, said yesterday that it expects to cut 10,000 to 12,000 workers -- or about 20 percent of its workforce -- in the next three months. IndyMac said it will offer voluntary severance packages to be followed by layoffs as it tries to shed 1,000 workers, or about 10 percent of its staff.
The announcements came on the day the Labor Department said the nation lost 4,000 jobs in August, led by the slump in housing.
The job cuts are the latest in a string of cutbacks since borrowers began defaulting in alarming numbers earlier this year. Dozens of lenders have closed their doors, and others have retrenched. But Countrywide and IndyMac, to a lesser degree, have been the most closely watched because of their size. Countrywide funded nearly one in five U.S. mortgages in the first half of the year.
"Countrywide is a proxy for the overall mortgage industry," said Guy Cecala, publisher of the trade publication Inside Mortgage Finance. "If Countrywide is laying off 20 percent of its people, you can expect 20 percent of all people in the mortgage industry will be laid off."
Countrywide said most of its cuts would come from the loan production side of the business and from administrative support areas. The Calabasas, Calif., company expects loan origination to drop 25 percent industry-wide in 2008.
Countrywide said its banking operation, insurance businesses and loan-servicing operations would not be materially affected.
The company had said it would lay off 1,400 workers; those layoffs are included in yesterday's announcement.
Both Countrywide and IndyMac, based in Pasadena, Calif., have shrunk their mix of mortgage offerings, largely by curtailing or eliminating loans that have fallen out of favor with investors -- namely loans that cannot be sold to District-based Fannie Mae or McLean-based Freddie Mac, the largest investors in U.S. mortgages.
IndyMac is best known for making Alt-A mortgages, which cater to borrowers who provide less documentation about income or employment than more creditworthy borrowers do. The company expects to break even or lose 50 cents per share in the third quarter. It also expects loan production volume to drop by half in the fourth quarter. But IndyMac should post a profit in that quarter and in 2008, chief executive Michael W. Perry said in a letter to shareholders.
"Clearly, we have experienced challenges in the current market, and there will surely be more before this difficult period is over," Perry said. "But the challenges we are facing today are, frankly, not as daunting as those we have faced in the past."
Angelo Mozilo, Countrywide's chief executive, had a dimmer view of the industry's woes. "Ours is a cyclical business, and over the years Countrywide has weathered a variety of market environments," Mozilo said in a letter to employees. He added, "This current cycle is certainly the most severe in the contemporary history of our industry."