Ouch. that's 20% of the workforce. This is going to bite.
Countrywide to Cut Up to 12,000 Jobs in Bid to Slash Costs and Cope With Soaring Foreclosures
LOS ANGELES (AP) — Struggling mortgage lender Countrywide Financial Corp. will cut as many as 12,000 jobs in a bid to slash costs and cope with soaring foreclosures and defaults, the company said Friday.
The cuts, amounting to as much as 20 percent of its work force, are needed because the company expects new mortgages to fall about 25 percent in 2008 from this year's levels, Countrywide said.
In a letter distributed to employees, Countrywide Chief Executive Angelo Mozilo called the current market cycle "the most severe in the contemporary history of our industry."
"During the past two years the growth in home price appreciation has stopped dead in its tracks and in many areas of the country it has turned in the wrong direction," Mozilo said in the letter.
In recent weeks, Countrywide borrowed $11.5 billion and sold a $2 billion stake to Bank of America so it could keep operating its retail banking and mortgage lending businesses.
The job cuts planned during the next three months are expected to center primarily on the company's production divisions and its general and administrative support areas.
Actual reductions could be lower if interest rates and other market conditions improve, Countrywide said.
The latest cuts followed the elimination of about 900 positions earlier this week and 500 others last month.
The Calabasas-based company employed more than 61,000 people as of July 31, with about 34,000 working in loan production.
Earlier Friday, IndyMac Bancorp Inc. announced plans to eliminate as many as 1,000 jobs, citing difficulties from the mortgage lending and housing market downturns.
The Pasadena, Calif.-based mortgage lender and bank said it expects its loan production volume to decline by roughly half in the fourth quarter.
Countrywide said it intends to keep transferring its residential lending business into its Countrywide Bank unit as a way to strengthen its access to funding.
Almost all of its residential lending activity will be originated through the bank by the end of this month, the company said.
Countrywide has also shifted its loan production guidelines and now only makes loans that can be sold on the secondary market to government-backed enterprises such as Fannie Mae or Freddie Mac or that qualify under investment requirements for its banking unit.
Countrywide has been struggling as the housing slump led to a sharp rise in mortgage defaults and foreclosures, particularly among borrowers with subprime loans.
The mortgage fallout has left many lenders strapped for money to fund new loans.
Lenders that relied on selling loans on the secondary market to fund their operations have been particularly hard hit, with dozens going out of business or forced into bankruptcy this year.
That has resulted in tens of thousands of jobs being lost industrywide.
Like other lenders, Countrywide has tightened its credit guidelines and stopped selling some types of adjustable rate loans.
In the letter to employees, Mozilo outlined additional steps the company is taking to shore up its operations.
Among the changes, the company is consolidating its sales force and plans to keep targeting borrowers who now have adjustable rate subprime loans with offers to refinance with prime loans that carry more stable payments.
Mozilo noted some 75 percent of the company's Full Spectrum Lending Division's loans this year have been prime loans, many sold to borrowers who refinanced from subprime loans.
Despite the layoffs, Mozilo said in the letter that Countrywide's consumer markets division would keep expanding its sales force.
Last month, the division hired nearly 1,000 sales people, a record for the unit, he said.
"As we carry out our plan, the company's overarching focus is exactly where it has always been: to remain an industry leader in the U.S. residential lending business," Mozilo said in a prepared statement issued to the media.
The company declined further comment.
Countrywide shares fell 27 cents to $18.21 on Friday. In after-market trading, shares rose to $18.48. Shares of IndyMac fell 25 cents, or 1.1 percent, to $21.41.
I first thought it was a misprint and was 1200 jobs but nope, it’s 12k and i’ve heard there are more to come if conditions worsen and we all know what’s ahead of us…
all I can say at this point is WOW!
On a positive note, Countrywide is doing the right thing by aligning themselves to the market so at least they will not go out of business! I feel if they need to cut 60% of their workforce to reflect market conditions then they will!
A couple of days back they said 900, now it will be 12,000 more. This gives you an idea of how quickly things are changing. Good they waited after market close to release the news. Imagine this on top of today’s the very week employment numbers that tumbled the markets.
Countrywide has 61,000 employees, so 12,000 is 20% of their workforce. Still pretty drastic and there is more to come, probably 12-15,000 additional layoffs because if you think we’re having bad times now wait till 2008.. it’s going to be a total MESS!
Once the venture capital dries up and more and more drugs go generic, the biotech sector will be hit hard.
This is only the beginning of layoff induced hard times.
1. Subprime = price drops
2. Alt-A = more price drops
3. Prime = more price drops
4. Fraud and Lies = more price drops
5. Foreclosures to market = more price drops
6. Layoffs = more price drops
7. More foreclosures = more price drops
“This is only the beginning of layoff induced hard times.
1. Subprime = price drops
2. Alt-A = more price drops
3. Prime = more price drops
4. Fraud and Lies = more price drops
5. Foreclosures to market = more price drops
6. Layoffs = more price drops
7. More foreclosures = more price drops
Yep, that is why it is stupid to think that 50% off peak is not possible in SoCal and specifically San Diego. There will be overcorrection to the other side of the mean. To think otherwise is nieve at best and myopic at worst.
Bob has the greatest question. Over correction would be 10-20% less workers than they had in 01-02 and telling you the mortgage mess is worse than we all would even think.
Countrywide is offering the highest rates I can find on a CD right now 5.49%, min 10k, for 1 year.
It’s obvious they’re desperate for money, but how can they do this? Or more importantly, isn’t this quite a risk? Sure it’s FDIC insured, but what happens if you open a CD with CW and they go BK? Do you get your money back? Does FDIC pay you out? What about interest?
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