Reuters reports that the layoffs in the mortgage business may just be starting. "The decision by the parent of Ameriquest Mortgage Co. to fire one-third of its employees may be the most sweeping recent overhaul by a mortgage lender as rates rise and borrowers retreat. It may not be the last."

"The announcement by Ameriquest's parent ACC Capital reflects an industry groaning as loan growth slows, competition rises, margins narrow, and some 500,000 people hope to keep their jobs. 'A year from now, I expect employment in this industry to be 20 to 25 percent lower,' said Michael Moskowitz, president of a New York lender. 'This will be driven by a need for increased efficiency, and lower production.'"

"'We think 40 percent of the people who are buying homes are merely speculators,' said David Olson, co-founder of Wholesale Access, which tracks the industry. 'It would be good for prices to burst, because sooner or later no one will be able to afford a house.'"

"Olson said: 'We're hearing that many of the medium-sized lenders are dropping out or are for sale, and most subprime lenders are struggling. If you can find buyers for these firms at all, the prices are not high.'"

"Mike Fratantoni, senior economist at the Mortgage Bankers Association, expects originations to fall to $2.4 trillion this year from $2.8 trillion in 2005, and $4 trillion in 2003. Jobs may follow suit."

"Equity Now, which employs 40 people, recently made its business entirely electronic to improve efficiency. 'From a mortgage banker's point of view like mine, I'm being squeezed when I offer a mortgage, and then squeezed when I try to sell it,' Moskowitz said."

The New York Post reports on how the Ameriquest move played out in one office. "In the bloodbath yesterday employees were assembled in their offices with security guards and fired en masse by a telephone recording from Ameriquest CEO Aseem Mital."

"'It was cold, and short and sweet; we were told to turn in our keys, empty our desks and get out by the end of the day,' said mortgage broker Carl Edgett, one of nine brokers left jobless in the firm's South Ferry, Conn., office. 'If we had questions about our severance and commissions due us, we were told to call a number, but when we called it was just an answering service's voicemail box.'"

Update: Readers sent in this breaking news from the Seattle Times. "Kirkland-based mortgage company Merit Financial will meet with its 300 employees this morning to let most of them go as executives decide whether to file for bankruptcy, according to two people familiar with the company's plans."

"Merit was founded in 2001. It grew quickly from a company with 12 employees and $50 million in loan volume its first year to passing the $2 billion mark in cumulative loans last May. At that time, it had 430 employees and planned to hire more."

"Like others in the mortgage business, Merit fell on hard times as the refinancing market dried up. Six months ago, it laid off about 20 people in its lending division and stopped making loans itself, acting only as a broker. The problems at Merit are peaking just two days after Ameriquest announced the elimination of about a third of its work force, 3,800 people."

"Rising interest rates and declining demand for mortgages are expected to lead to more job losses at mortgage firms."