Countrywide To Slash Jobs
September 10, 2007
Countrywide Financial, the US’s biggest mortgage lender, is to make substantial job cuts, amounting to up to one fifth of its current workforce.
Countrywide had been one of the worst hit lenders by the ongoing sub-prime disaster, which continues to haunt banks throughout the US and indeed across the world.
The job cuts, to extend to around 12,000, are set to reflect significant losses from rising defaults and the current negative US housing market which has seen the company share price fall by half in recent months.
Official projections from Countrywide forecast a decrease in new mortgages by up to 25% through 2008 on 2007, after what has already been a bad year for mortgages and mortgage lenders.
As interest rates have risen, the widespread practice of over-lending to the sub-prime sector has left many banks and lenders across the world struggling for liquidity. With cash tied up in mortgages that homeowners can’t afford to repay, banks have learned the tough lessons of over exposure to risk.
With repossessions and foreclosures dramatically up at present, buyers are even keener to stay away from the over-supplied US housing market in favour of renting accommodation, amidst fears that the economy as a whole is continuing to perform below par.
House price inflation has almost completely ground to a halt over the last few years, reflecting the extent of imbalance within the housing market and encapsulating the degree of difficulty faced by those exposed to the sub-prime
With the number of new home buyer enquiries falling constantly, and top banks forced to borrow money or sell assets to fund daily cash flow, the situation has led to a sharp fall in investor confidence with an undoubted knock-on effect on the wider economy.
Countrywide Financial have already cut 1,400 jobs as a result of recent events, signifying a marked reduction in staff and labour costs.