…and the lay offs begin

[hipmatt]

here is the article from the wall street journal

Ameriquest Parent to Cut Jobs,
Close Branches as Rates Rise
By JAMES R. HAGERTY
May 3, 2006; Page A2

ACC Capital Holdings Corp., the parent of Ameriquest Mortgage Co., announced plans to eliminate 3,800 jobs and close 229 branches as rising interest rates and a cooling real-estate market put pressure on lenders.

Closely held ACC, based in Orange, Calif., said the job cuts at its Ameriquest and Town & Country Credit mortgage lending units will shrink its total work force by about a third.

Ameriquest, which has built up its brand through sponsorships of big league sports teams and rock concerts, is the nation’s largest subprime mortgage lender, according to Inside Mortgage Finance, a trade publication. Subprime loans are those granted to people whose poor credit records or lack of assets prevent them from qualifying for the lowest-cost loans.

Home mortgage originations — that is, new mortgage loans, including refinancings — are projected to total $2.365 trillion, down 14% from 2005, the Mortgage Bankers Association says. Faced with slower business, some other big lenders also are scaling back. In February, Washington Mutual Inc. announced the elimination of about 2,500 jobs resulting from the closure of some offices providing support for the company’s home-loan business.

ACC is closing all of its retail branches and will rely instead on four regional mortgage centers in California, Arizona, Illinois and Connecticut. The company also will eliminate some jobs at its headquarters in Orange.

Adam Bass, vice chairman of ACC, said in a statement that the moves aren’t just a response to “challenging” conditions in the market. He said people increasingly are shopping for mortgages online and over the phone rather than through branch offices.

The cost cutting will allow the company to price loans more competitively, he said, adding: “It’s about getting ahead of the competitive curve for the long term.”

The moves come as Ameriquest is trying to recover from a scrape with state regulators. In January, Ameriquest agreed to pay $325 million and change some of its practices to settle charges by state attorneys general that the lender “deceived consumers as part of high-pressure tactics to sell mortgage refinances.” Most of the money is to be used to compensate hundreds of thousands of Ameriquest borrowers.

The states charged that Ameriquest didn’t adequately disclose prepayment penalties and other loan terms in some cases. The regulators also said the lender urged appraisers to inflate estimates of home values and encouraged some borrowers to lie about their income to qualify for loans.

Ameriquest denied the allegations but agreed to a series of new policies, including giving borrowers a one-page form at least three days before a loan is completed “clearly describing” terms. Ameriquest also promised to ensure that employees’ claims about the offerings of competitors are accurate and said it would refinance subprime loans only if there is a benefit to the borrower.

The family of Roland Arnall, Ameriquest’s founder, still owns a majority of ACC Capital, the parent company.

[davelj]

in about two years there will be forums at the large mortgage banking conferences throughout the u.s. called “keys for survival in the mortgage banking industry.” mortgage banking is one of THE most cyclical businesses out there. and this has been a decade-long up cycle. i suspect that mortgage banking employment will ultimately drop to half its peak 2004 levels and profitability will be hard to achieve even for the efficient operators. bull markets hide all sorts of sins…

also, i wonder how many of this 3,800 are either recent home buyers or serial home equity extractors with “innovative mortgages”?

[Bugs]

I met one of the upper management staff for Ameriquest’s corporate office a couple weeks ago. Nice guy, I hope he makes it. He was recently hired to clean up some of their mess. The closing of the branch offices is consistent with what he was recommending they do to stave off their regulatory problems with some of the states. Ameriquest was reportedly about 1″ away from getting kicked out of a couple states anyway. I think this move has more to do with reining in their branches, many of which have been out of control for a while now, than it does with declining volumes.

On the other hand, I personally know of a couple mortgage brokerages in town that are already in some real pain because of declining volumes here. I also know of a couple of the realty agents here in town who have hit a wall – no sales since the beginning of the year. I’ll wager the Hummer dealers will have a glut of used H2s pretty quick.

[powayseller]

What are the mortgage brokers and realtors, who lost their income, doing to get by? How long had they been in the business?

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