Major Lenders Laying Off Thousands

Late Monday, one of the largest credit card issuers in the U.S., Capital One, announced that it was shutting down its wholesale mortgage unit and laying off 1,900 workers.  It was the latest in a string of announced workforce cuts from major lenders in the past few days.

McLean, Va.-based Capital One Financial (NYSE: COF) cited "an unprecedented set of market circumstances" in a press release Monday as the main driver in shuttering their GreenPoint mortgage unit. As a part of the cuts, Capital One will close 31 GreenPoint offices in 19 different states and layoff 1,900 employees. GreenPoint was Cap One’s wholesale mortgage unit and focused on prime nonconforming mortgages, like jumbo loans and low- or no-documentation loans, commonly referred to as “Alt-A” mortgages.

GreenPoint became a subsidiary of Capital One last year when Cap One bought North Fork Bank. Capital One had already announced job cuts of around 2,000 employees in late June as part of a cost-saving initiative. The latest job cuts are above and beyond the cost-saving plan and are directly related to current credit market conditions.

Countrywide Financial (NYSE: CFC), the largest mortgage lender in the U.S., said on Monday that it too will be cutting positions in the mortgage sector. The Calabasas, Calif.-based lender said that 500 jobs will be cut at its near-prime/subprime arm Full Spectrum. Full Spectrum also specialized in Alt-A loans.

SunTrust Banks, Inc. (NYSE: STI) also announced Monday that it will be cutting 2,400 jobs, or 7 percent of its workforce. The Atlanta-based bank said in a release that its cuts will take place by the end of 2008 and that they were a part of a previously-announced restructuring plan to “enhance shareholder value and the client experience.”

Challenger, Gray & Christmas announced today that the U.S. finance industry had already seen 87,962 job cuts this year, a 75 percent rise from the 50,327 reported in all of 2006. The human resources consultant reported that 41 percent of the cuts this year were related to problems in the subprime mortgage market.

The announcements Monday came on the heels of subprime lender NovaStar Financial’s (NYSE: NFI) disclosure Friday that it would cut 500 jobs, or 37 percent of its workforce, and exit the wholesale mortgage market for the time being. NovaStar also said that the CEO of its NovaStar Mortgage unit will be leaving as a part of the cuts.

Also last week, the country’s second-largest privately held mortgage lender, First Magnus Financial Corp., put a notice on its web site saying it will not be funding any further mortgages. Various media reports have claimed that 99 percent of Magnus’s 5,000+ person workforce have been laid off and more than 300 offices closed, according to a filing the lender made with the state of Arizona. The company has not publicly commented on the cuts, but said on its website, "In light of the collapse of the secondary mortgage market, First Magnus will not fund any future mortgage loans. We explored all options before taking this action but were left with no viable alternatives."