The Wall Street Journal reports that Countrywide has begun layoffs in its Full Spectrum lending division. Full Spectrum is Countrywide’s euphemism for its subprime and alt-a retail lending divisions. I can personally confirm it as well. Several of our friends have reported that sales team managers are being demoted and loan originators that are not performing near the top of the pile are either out the door or sweating in their seats.
Countrywide, which may have faced a severe liquidity crisis or concerns last week when it tapped $11 billion in credit, acknowledged that they will be focusing more on agency products (conforming loans sold to Fannie Mae and Freddie Mac). This strategy shift would necessitate the paring down of the alternative financing group as salaries, insurance and infastructure to support the nearly 6,000 originators has a heavy weight on the bottom line.
The layoffs hit the company’s Full Spectrum unit, which handles “Alt-A” loans, which fall between the prime and subprime categories and often are for those applying for loans that don’t document their income.
According to the report, Calabasas, Calif.-based Countrywide (NYSE: CFC - News) is cutting back on lending and costs because the company will not be able to sell off risky loans, due to rising concerns in the mortgage industry.
In addition I’ve heard of layoffs in their Specialty Lending Wholesale division which is their subprime wholesale channel. Wholesale is where they fund loans brokered to them through smaller mortgage brokerages across the country.
This should come as no surprise to any one that is paying any attention. Countrywide, while a diversified business in many respects, is primarily a mortgage seller. If there is not a market for their loans then there is no money and efficiencies must be found. While they publicly state their goal is growth and market share - taking more of a shrinking market will still necessitate staff reductions.
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[Source: Blown Mortgage]
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