The Bankruptcy Law Firm

Contact Our Law Firm

* Name:
* Home Phone:
* E-mail Address:
* Bankruptcy Issue:
 

An attorney client relationship is not established by submitting this initial contact information to our office.

You can contract with The
Bankruptcy Law Firm, PC, with confidence, because
The Bankrutpcy Law Firm, PC is a member of the Better Business Bureau, and has met all
requirements for being certified by the Better Business Bureau as a reliable business. Click on the BBB logo above to confirm The Bankruptcy Law Firm's certification
by the BBB.

COUNTRYWIDE TO CUT 12,000 JOBS

September 7, 2007

COUNTYWIDE IS TO CUT 20% OF WORK FORCE
Countrywide Financial Corp., cutting costs in the face of a severe drop in home-mortgage lending, said it expects to reduce its work force by as much as 12,000 jobs, or about 20%, in the next three months.

The move Friday, on a day when investors were already nervous about jobs, was the latest step in a struggle by the largest U.S. home-mortgage lender in terms of loan volume to cope with rising defaults, falling house prices and the flight of investors from the market for many types of mortgages now deemed too risky.

Countrywide said it expects the current turmoil to reduce its mortgage lending next year by 25% from this year's level. In a letter to employees, the Calabasas, Calif., company's Chief Executive Officer Angelo Mozilo called the current down cycle in mortgages "the most severe in the contemporary history of our industry."

One benefit is that interest rates have risen steeply on many types of loans, providing better yields "than we have seen for years," Mr. Mozilo said. But Countrywide also is having to offer higher interest rates to attract deposits for its savings bank.

Meanwhile, IndyMac Bancorp Inc., the nation's ninth-largest home lender, said it will cut about 10% of its work force of around 10,000 in the next few months. It also said that it plans to halve its quarterly dividend, and that it may post a loss of as much as $36.8 million for the third quarter.

But CEO Michael Perry said the Pasadena, Calif., savings and loan should be "solidly profitable" in the fourth quarter and in 2008. "We do anticipate that this quarter will represent the trough for our earnings during this current down cycle," Mr. Perry said in a letter to shareholders.

In August, Countrywide sought to shore up its finances by selling $2 billion of preferred convertible shares to Bank of America Corp., giving that bank the option to convert the preferred into a stake of about 16% in Countrywide's common stock. Countrywide also borrowed $11.5 billion through a line of credit from 40 banks, replacing short-term, commercial-paper funding no longer available from nervous investors.

Bank of America spokesman Scott Silvestri declined to comment on whether the bank played a role in Countrywide's decision to make the job cuts. "We have a passive investment in the company," he said.

Because investors are balking at buying loans, Countrywide and other lenders are stuck with some loans that have rapidly lost value. Countrywide is expected to mark down the value of many of those loans when it reports third-quarter earnings next month, while increasing provisions for losses on defaults and foreclosures.

Frederick Cannon, an analyst at Keefe, Bruyette & Woods, said the market turmoil makes it hard to estimate results, but he forecasts that Countrywide will report a loss of $582 million, or 99 cents a share, for the third quarter.

Countrywide said it expects to reduce its work force by 10,000 to 12,000 jobs, including about 1,400 job cuts recently announced. The company is retrenching to focus on relatively conservative loans that it can hold as long-term investments in its savings-bank unit or sell to government-backed investors Fannie Mae or Freddie Mac. Countrywide also will aim to make loans that can be insured by the Federal Housing Administration. The job cuts may be smaller if the market improves, company officials say.

Countrywide said some of the job cuts would be in its "wholesale" division, which deals with loans originated by mortgage brokers.

Countrywide and other big lenders have been putting more emphasis on their direct lending through branches, Web sites and call centers, and reducing their reliance on brokers, who handled the bulk of all loans during the mortgage industry's boom of 2003 through 2005.

Countrywide also is cutting back on its "correspondent" unit, which buys loans made by smaller lenders.

But Countrywide has been hiring more loan officers for its "retail" lending operations, which count on close ties with local real-estate agents and builders to bring in customers. This operation hired nearly 1,000 sales people in August, the company said, largely from rivals forced out of business.

Countrywide's strategy is to rely on its savings bank to provide funding for lending. That funding comes from deposits, as well as borrowings from the Federal Home Loan Bank system. The goal is to end reliance on short-term borrowings from jittery Wall Street firms and other creditors.

As for IndyMac, the company in recent weeks has slashed lending and forecast that its mortgage-loan production in the fourth quarter will be $12.8 billion, less than half the $26 billion of a year earlier. Like Countrywide, the company now is focusing on loans that can be sold to Fannie Mae and Freddie Mac. Such loans should account for 85% of the company's total in the fourth quarter, up from 19% for 2006 as a whole.

The Bankruptcy Law Firm represents small businesses and individuals in bankruptcy matters in all divisions of the United States Bankruptcy Court for the Central District of California including the counties of Los Angeles, Orange, Ventura, San Bernardino, Riverside, Santa Barbara, and South San Luis Obispo. Please call or contact our Los Angeles bankruptcy law firm for a free initial consultation regarding your financial situation. The Bankruptcy Law Firm, PC offers competent bankruptcy legal representation at fair prices.

:: Back to Articles

Free First Consult to Tell You if We Can Help You

Phone Us at 1-310-559-9224; or from Los Angeles and Ventura Counties Only Phone Toll Free 1-866-BKY-ATTY