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Record Year for Financial Services Layoffs

Job destruction among mortgage lenders is occurring on such a large scale that 2007 is set to shatter the annual record for overall U.S. financial industry layoffs, set in 2001.

August's 26,000 banking job-cut announcements raised the year-to-date total to 107,758, according to a widely followed survey by outplacement consultant Challenger, Gray & Christmas. As reported by CNNMoney.com, 2001 - the industry's previous record layoff year - saw 116,515 jobs bite the dust. Challenger, Gray & Christmas has conducted the monthly survey since 1993.

"We'll now start to see how it impacts as the effects ripple into the other areas" of the economy, John Challenger, the firm's chief executive, told CNNMoney.

The bulk of the eliminated banking jobs appear to be retail loan officer positions located in the branch offices of banks and mortgage lending companies. But this year's surge of sub-prime mortgage defaults and the steep drop in origination of sub-prime and other non-traditional loans is taking a toll on origination and trading of mortgage-backed bonds.

"The real fear is that banks will start paring from non-mortgage jobs," observes FierceFinance. "There is lots of fear in the bond market and up and down the manufacturing line when it comes to structured products." Another cause of anxiety is that banks "will use the moment to pare people who they deem under-performers," the newsletter adds.

The largest financial job reductions announced in recent months were 12,000 by Countrywide Financial and 2,000 each by Lehman Brothers and sub-prime specialist Ameriquest Mortgage.

Speculating about possible casualties beyond loan origination, CNNMoney mentions private equity firms that leveraged investments in real estate "and now find themselves stuck with properties that either are underperforming or cannot be sold due to tighter lending restrictions."

The article notes that mortgage brokers have avoided mass layoffs thus far.

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AUTHORAnonymous Insider Comment
  • NB
    NB
    27 September 2007

    And how many of all mortgage brokers made sure that they reached the top of the iceberg in their careers a couple of months ago lending money to buyers who would not have qualified otherwise? This is why they still seem to be performing well, but wait until most of their clients start to default and foreclose!!! The record foreclosure rate thus far is of people who bought homes about a year ago, pocketed the credit line and spent it on vacation and cars. now, stuck with high interest rates and no one to pay the then-appraisal-price, they ruin their future and creditworthiness for years to come. where are now the hard working mortgage brokers?

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