ACC Layoffs ‘May Not Be The Last’: Updated
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.”
‘expects originations to fall to $2.4 trillion this year from $2.8 trillion in 2005, and $4 trillion in 2003.’
The amazing thing about this data is something the mortgage industry doesn’t like to discuss; prime loans actually declined in 2003, so IMO that’s when the push for ‘exotic’ loans began. 2003 was also a time when the Fed was worried about deflation, so they were keen to get money into the system.
Origination News has this:
‘Harbourton Capital Group Inc., McLean, Va., has reported a net loss of approximately $2.8 million for the fourth quarter of 2005, in part as a result of ‘turmoil in the secondary market’ affecting its wholesale mortgage subsidiary. The subsidiary, Harbourton Mortgage Investment Corp., originated $189.2 million in loans in the fourth quarter, down 33% from $280.6 million in the previous quarter, the parent company said.’
ben, you have to remember that from 2002 to 2003 there was a tremendous burst of growth in the mortgage industry. underwriters were being paid huge signing bonuses, wholesale reps were being courted away from competitors. when rates popped at the end of 2003, you had to do something with all of these people. all of your newly capitalized firms had to get their money out on the streets. i don’t think that there would have been such huge growth in the subprime sector had there not been such a bulge of refis in 2003 imho.
OT, but did anyone see this city-by city bubble breakdown from Bankrate on Yahoo?
SLC may hold up till 07
otherwise every place on that list is already going do
30 may A_S
Wow! This article says that the Seattle area (where I live) is set to keep on appreciating. I guess the explosion of option ARMs, and exotic mortgages around here, has all been rational since the homes will just keep appreciating indefinitely.
Philly is on the “continued growth” list. Yet on other websites it’s listed as 40% overvalued. ?!?!
“‘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
______________________________________
Looks like mgmt treats employees like their customers!
Looks like mgmt (actually, CEO Aseem Mital) knows the character of the brokers he employed.
A friend of my wife interviewed with Ameriquest several months back. Said it was a very in-your-face agressive atmosphere. They said 48 hours was the normal work week. Bust your hump to get ahead, etc. Looks like they were just as agressive when they needed to eat their young. Ah, capitalism!
Ameriquest: “Proud Sponsor of the American Dream.”
…to be followed by these same employees turning in their house keys in another six months.
Several people have posted here and on other sites that this was only a shift in business model. BULLSHIT. This is survival. No one fires 40% of their workforce as a shift in business model.
They are sending some of the job out of country to save cost or make More profit and make money. (They are same at the end). Know someone who works there in HQ, (different dept. though) I am afraid to call, hopefully he still has his job..
harsh.
What your not seeing in the news but I’ve been seeing in the industry for the last few months is the major commission cuts for reps and pay cuts for employees of most the major wholesale lenders I work with, especially in subprime. It’s either take the cut or hit the bricks.
It’s a brutal industry when it turns for the worse.
My brother - who is my source for some early news - was making $300k per year (03, 04). Last year he made $90k. Ouch. and he spent every cent of it.
Is he worried about this year?
No - he is a permabull. There is a 10 year age difference between us. He has only seen good times. Nothing like experience to convert a perma-bull. According to him things will level off and slowly improve, we are at the bottom and its up from here.
“Ouch” indeed, considering there was still some money to be made last year. I considered last year a bonus because I really thought we were over and done with last Spring. But then we had the bounce that prolonged the “mess” into the end of the year. No such luck this year. It really is over this time. No more easy money in this biz.
I hope your bro was sockin’ away some of that easy money. I’ve been “preaching the word” to my LO’s since this whole party began to save, save, and save some more because it’ll be over soon. Ofcourse, none listened and thought I was crazy. Now that it’s been dead (and I mean DEAD) up here in Reno/Carso/Tahoe since the turn of the year, all of them are just wide eyed wondering what happened. I’ve learned alot about human nature from this whole thing. One of the lessons I’ve learned is that people, for the most part, would rather live in denial.
His big accounts were in San Diego and we know how that market has turned - declining volume . The company also changed their commission structure almost every month last year. I have no idea how much he is making now, he only bragged about the good times. He will learn a lot from this and come out better on the other side.
Wow - have people seen the new housing article on CNN? It is pretty brutal! I’m a housing bear and it kinda freaked me out!
http://money.cnn.com/2006/05/03/news/economy/realestateguide_fortune/index.htm?cnn=yes
Anybody that’s a salesperson should now that you have up and down cycles . That’s why you have to save your money while your doing good so it averages out . Am I suppose to feel sorry for people that were making 300K a year ,( which takes some people 10 years to make ) ,who spent like drunk sailors . Whenever I was on commission sales I would budget pursuant my lowest salary ,not the highest .
I don’t feel sorry for any of these people! Most of the people were in the right place at the right time and really had no idea what they were doing, except screwing people over and being encouraged to do so by their employers.
Nothing like screwing over fools to earn a six-figure income, I guess?
‘The message is clear. Five years of superheated price gains rescued America from stock market collapse, put billions in consumers’ pockets, and ignited a building boom that bolstered the nation’s economy. (To relive the frenzy, see “Riding the Boom.”) But it’s over. The great housing bubble has finally started to deflate.’
Deflation is indeed the watchword from here on down to the price celler.
I was just reading that, and wow, this is just the tip of the ice-bubble!
Thanks. In my opinion, this article is an excellent discription of where the market is today. A must read.
WOW DCgirl Thats a great article! I have been preaching about the bubble to my wife for a year and a half now. She has some strong nesting urges but she leaves the finances up to me. So when we got married this past August we rented a basement apartment from my parents for $300 a month. She thinks it is emberassing to be living with her husbands parents and she really wants her own single family house. I didn’t want a $3k/mo mortgage and won’t risk taking an ARM. These articles really help convince her it would be stupid to buy now. Hopefully by late summer or fall of ‘07 prices will be down enough that we can buy a decent place without so much downside risk. The good news is we are piling up cash very quickly, so hopefully we won’t have a dollar crisis that screws us. OT- Anyone know of an internet bank that lets you hold foreign currency with decent interest rates and low fees?
http://www.everbank.com/main.asp?affid=eb
I haven’t done business with them, so pursue at your own risk. They post at daily reckoning website (Chuck Butler).
I use the Prudent Bear Global Income fund.
Great article. If you follow the link at the end, you will find a series of bubble articles, each one describing what this blog has been discussing for months. There are some great lines in the next linked article:
The sudden shift in the nation’s housing markets is exploding some long-held beliefs. The first is that a scarcity of buildable land on the coasts keeps a cap on supply and prevents prices from falling.
A second myth is that today’s big homebuilders learned their lesson in past downturns.
A third tenet holds that home values never drop in areas where employment is rising.
The current boom has spawned one new myth of its own: Hot markets will glide to a soft landing.
So much for the prices ‘leveling’ off!!
“Ratcliff [Economist, UCLA Anderson Forecast] said no crash in prices is likely since the economy is so healthy. Generally, home prices fall only when large numbers of workers lose their jobs.”
Bubble Markets Inventory Tracking
1Q, 2006 cash out refi activity and postscript on Bloody Tuesday.
http://www.xanga.com/russwinter
I enjoy reading your blog Russ.
from the CNN article.
“Take a deep breath. We’re not forecasting a nationwide housing collapse. For one thing, the vast expanse of America between the coasts was never touched by real estate mania and is in no danger of a meltdown.”
this is wrong. yes, we won’t see a meltdown, but prices will most likely decline. we can go to non-bubble areas and look at a chart when the last downturn happened, these non-bubble areas declined too. they may not be as bubbly as san diego and other “superstar cities” but they have declined in the past. the same fundamentals that drive up prices in bubble cities drive them up in more modest cities.
too say that there must be a bubble because prices have even rose in city ABC is just like saying RE only goes up. prices generally rise and fall in tandem all over the US, no matter what bad locale you pick. just because an area is bad doesn’t mean prices only go down or stay flat.
Yeah, this doesn’t take into account the depopulation and change in demograpics in the flyover states. The fact that house prices didn’t go down in these states despite losing the younger work force to coasts is equivalent to a price appreciation. When the **** hits the fan, these places are going to tumble too.
hmmm… looks like my post didn’t take. let’s try again.
Anderson Forecast sees leveling-off through 2011
of course, the leveling off is based on the assumption that…
“no crash in prices is likely since the economy is so healthy. Generally, home prices fall only when large numbers of workers lose their jobs.”
So much for prices leveling off…
Bubble Markets Inventory Tracking
OT but did you guys hear about longtime bear Stephen Roach? He’s done a complete 180 and is now spouting optimism in the like of the Great Liar Larry Kudlow. This is significant. Think contrarian. Roach finally sees on the horizon what he’s been calling out for years and now doesn’t want to be the guy to blame so he does a 180.
Exploding price inflation, incompetent national leadership, geopolitical doom, failing wages. The only thing left is a currency crisis.
Another sign of capitulation.
Oh, don’t worry… the currency crisis IS ALREADY ON. Gold hasn’t been going up for nothing.
Robert Kiyosaki has a good article on this in the Articles section of his website…
The Next Big Deal
While there are many financial storm clouds on the horizon, the storm cloud I am watching is the continuing decline of the U.S. dollar. For over 40 years, the U.S. dollar has been the currency of choice of the world. Due to excessive debt, both nationally and as a people, the mighty U.S. dollar will come under even greater attack as the world realizes how weak the dollar is.
Recently, the Prime Minister of Malaysia, Mahathir Mohamad, urged a room full of Saudi Arabians to not sell their oil for dollars. Instead, he urged them to sell oil for gold. He said, “The price of oil is $33, but the U.S. dollar has declined by 40% against the euro so you’re effectively getting $20…so you’re being short changed.” Now you may understand why Kim and I invested heavily in gold and gold shares seven years ago, when gold was bad news.
While it may be almost too late to invest in gold, because gold at around $400 an ounce is now the good news, there is a lot more bad news ahead. Today, many people are living in dread about the rising price of gas at the pumps. Rather than join them in their fear, I suggest you begin to think about the ripple effect higher gas prices and a weaker dollar will have worldwide. Begin dreaming about a real estate crash or a banking failure due to excess credit. When you can see the opportunity in what other people fear, you will begin to see the brightness and excitement of the future ahead.
Gold is currently so high, that my American Eagle gold proofs my soon be worth more melted down…
As the pennies go, so do the dollars…
do a graph of gold against lead, copper, zinc, pretty much any metal since 2001. You will see that gold has underperformed. So is it really demand for gold as a monetary asset that is behind its current price rise? Or just being pulled along in the wake of the huge commodities bull market.
The old saying goes that markets make opinions.
Good point. I suspected that the rise in pretty much all commodities has to have common causes.
“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
Mike expects originations to be down 14% and yet says ‘Jobs MAY follow suit’. Please. If loans are down that much jobs will surely be lost in the mortgage industry.
David
http://bubblemeter.blogspot.com
Within a month, the U.S. currency was called “unreliable as a reserve currency” by Finance Minister Alexei Kudrin, made a taboo word by the Public Chamber and centrist politicians, and ditched by the general public amid reports of its imminent depreciation.
http://tinyurl.com/l3czk
From The Moscowtimes
As a mortgage-industry long timer I for one welcome the industry retraction. Most of the fraud and deception in our business comes from those who entered the market during the refi boom to make easy money. They will be the first to be laid off or quit and move on to the next ‘hot’ market. Probably foreclosure property investing.
There is a whole sub-class of people in this economy that move from one hot spot to the next. In 1999/2000 it was software development. From 2002-2005 it was mortgages. What will be next? It’s easy to spot these clowns from a mile off. They talk like they are geniuses, walk around with fat wallets, and drive Hummers. They don’t like to talk about their previous job experience unless you get them drunk and then they admit in 1998 he was a “Shoe Carnival” salesman. They are very good with key words and industry speak but cannot explain the fundamentals or why things are a certain way.
I know a guy who falls into this category lock, stock, and barrel. He was making $70k as a software tester from 2001-2002 and quit to write mortgages in 2003. I ran into him at a bar and he asked me for a job - said the only thing he can find is something paying $30k. BOO HOO
Bill;…Will you please ask them to take all the Suzanne’s with them also ??
What happened to “stickyness?” Shoudln’t it take time and shouldn’t it be a slow process as mortgage businesses try to use the opportunity to gain market share and such? I’ll keep repeating until everyone understands; this will be breathtakingly fast. Does anyone think this is limited to ACC? Doesn’t anyone understand that this opening volley is nothing compared to the barrage impending? When half the mortgage industry is gone the other half is not going to loan to half the remaining customers out of fear. Take away the 75% of the stupidest recent buyers and what happens?
1991 x 2 ?? x 3 ?? Fasten the seatbelt….No, No, make that a sholder harness….
Thanks to the readers who sent in the Seattle Times update.
Maybe this will shock some of the Seattle realtors into a bit of stunned silence for at least a few days. That would be a relief.
Yesterday Ameriquest, today Merit, and a friend at a bank tells me WAMU is next. We’ll see if her information’s correct. Maybe tommorow?
I can just picture some of those canned Ameriquest brokers and their former FB clients huddled together around a trash-can fire, sharing a meal of rat kabob washed down with Thunderbird.
OK Sammy;….A few more like that and we will need to put you in the catagory with Rainman, Cote & HD…..
Love your visuals Sammy–
“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.”
And thus the predators became the prey.
Oh the humanity.
Sammy, if you don’t already, you should be writing sitcoms. The sarcasm is even more than I can muster…