1000 Loan Payday
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A Friday night headline from Calabasas: ‘Home-loan colossus Countrywide Financial Corp. announced Friday that it would slash as many as 12,000 jobs, or 20% of its workforce, saying the downturn in the housing market and ensuing credit crunch have created the worst conditions ever seen by the modern mortgage industry.’
More from the L.A. Times: ‘The announcement by Calabasas-based Countrywide came hours after its Pasadena-based rival, IndyMac Bancorp, warned it probably would record its first quarterly loss since 1998 and would cut 1,000 jobs.
Countrywide said it expects its loan originations in 2008 will be about 25% lower than this year.
The New York Times quotes an industry expert who warns of a deeper decline, and possibly deeper layoffs: ‘They are looking at closer to a 40% or 50% drop rather than a 25% drop,” said Guy Cecala of Inside Mortgage Finance. ‘I would guess that 12,000 is not going to be enough. It is possible they would lay off 20,000 employees,” Mr. Cecala added. “You don’t need 60,000 employees with a plain-vanilla conforming mortgage operation.”
The AP quotes Countrywide CEO Angelo Mozilo: ‘We are taking decisive action to ensure that Countrywide continues to be well-positioned for further success.’
Our take: We hate to say that massive job cuts make sense, but if a company with 60,000 employees loses 25% of its business, it makes sense to cut thousands of jobs.
Your thoughts? Comments? Insights?
Photo Credit: Reuters