Mortgage Businesses Shutter in Subprime Debacle
JOHN YDSTIE, host:
Elsewhere in the mortgage business, the financial news is tightening. Accredited Home Lenders announced yesterday that it would stop writing new loans and lay off more than half its workforce. Lehman Brothers is closing its BNC Mortgage unit. And Quality Home Loans has joined about a dozen mortgage companies in filing for bankruptcy.
NPR's Scott Horsley reports.
SCOTT HORSLEY: San Diego-based Accredited Home Loans had been one of the nation's biggest subprime lenders. But the company plans to close all of its retail loan offices within two weeks, laying off some 1600 workers. The unemployed workers will have plenty of company. Layoff specialist John Challenger, who's been tracking the industry, says more than 13,000 jobs have been cut in the financial sector just since Friday.
Mr. JOHN CHALLENGER (CEO, Challenger, Gray & Christmas, Inc.): Many of these mortgage companies have just frozen their operations. They've told their people to write no more loans, to not process them - not even take calls. And now they're closing down those operations, and we're seeing that occur in massive numbers.
HORSLEY: That's because Wall Street investors have been scared off by a rising number of mortgage defaults. Without those investors' money to lend, the business quickly dried up.
Mr. CHALLENGER: Three weeks ago, many of these mortgage companies were writing mortgages as fast as they could. Now they're writing none. They just - it came to a screaming stop.
HORSLEY: Accredited found a bit of a lifeline Tuesday, selling a billion dollars worth of risky home loans to an unnamed investor. The company says with that cash and its reduced workforce, it hopes to limp along until market conditions improve.
Scott Horsley, NPR News, San Diego.