Mortgage industry tanking

Sept. 10 (Bloomberg) -- The worst U.S. housing slump in 16 years may lead mortgage companies to eliminate almost 100,000 jobs, more than double the number already cut this year.

As many as 20 percent of the nation's real estate loan officers and mortgage brokers will be fired, according to Josh Rosner, managing director at the New York investment research firm Graham Fisher & Co. That's in addition to the 10 percent reduction from December to July that thinned their ranks to 450,000 as investors stopped buying mortgages and lenders curtailed financing to avoid rising subprime defaults.

``Originations are going to decline dramatically,'' Rosner said. ``We are just at the front-end of seeing the large banks and investment banks start to cut their capacity.''

Countrywide Financial Corp. said Sept. 7 it will cut 10,000 to 12,000 jobs. Lehman Brothers Holdings Inc., the biggest underwriter of mortgage-backed bonds, and IndyMac Bancorp Inc., the second-biggest U.S. home-loan company, also announced job reductions last week.

At least 100 mortgage companies have sought buyers or halted lending since the start of 2006, according to data compiled by Bloomberg. A record number of Americans faced foreclosures in the second quarter, the Mortgage Bankers Association in Washington reported last week.

``When you're born in a boom, you generally die in a bust,'' Countrywide Chief Executive Officer Angelo Mozilo said in an interview after the Calabasas, California-based company announced the cuts eliminating about 20 percent of the 55,000 employees it had at the start of the year. ``Most of the companies that are gone have never been through a period like this.''

Shares Decline

Countrywide fell $1, or 5.5 percent, to $17.21 as of 4 p.m. today in New York Stock Exchange composite trading. The shares are down almost 60 percent this year.

Mortgage volume may drop to $1.8 trillion next year, the lowest since 2000, after a peak of $4 trillion in 2003, Moshe Orenbuch, an analyst at Credit Suisse Group, wrote in an Aug. 30 report. ``The housing market is unlikely to rebound until 2009,'' he said.

The job cuts at Countrywide almost doubled the total reductions announced since Aug. 1. First Magnus Financial Corp. fired all but 50 of its 5,500 employees when the Tucson, Arizona- based company closed last month. San Diego-based Accredited Home Lenders Holding Co. eliminated 1,600 positions; IndyMac of Pasadena, California, 1,000; Cleveland-based National City Corp., 1,300; and NovaStar Financial Inc. of Kansas City, 775.

Bear Stearns

Bear Stearns Cos., the second-biggest underwriter of mortgage-backed bonds, shed 240 mortgage jobs in mid-August. Lehman is firing 2,050. Both firms are based in New York. London- based HSBC Holdings Plc, Europe's largest bank by market value, removed 600 positions in the U.S. linked to the housing industry.

The mortgage industry's decline may have contributed to a drop of 4,000 U.S. jobs in August, according to a Sept. 7 report from the Department of Labor. The drop in nationwide employment was the first in four years.

``It's probably not going to be the last cut'' at Countrywide, said Sean Egan, managing director of Egan-Jones Ratings Co. ``You'll probably see some announcements over the next 30 days'' from other mortgage providers, he said.

``This overcapacity had to be taken out of the system before satisfactory returns could return to the business,'' Kerry Killinger, CEO of Seattle-based Washington Mutual Inc., said today at an investor conference in New York.

Pay Cuts

Employees remaining in the mortgage industry probably will have lower pay, including executives whose bonuses depend on profits and brokers who get paid on commission, said Bert Ely, an Alexandria, Virginia-based consultant.

``The slowdown is deeper than a lot of people thought,'' Ely said. ``I don't think there's anybody now, even the optimists, who think this will run its course by the end of the year. And this isn't something that's going to bounce back quickly.''

The contraction may also lead to lost jobs and income for mortgage appraisers, title-company clerks and settlement attorneys, he said. ``All kinds of people that feed off the origination activities are suffering cutbacks,'' he said.

Analysts at Merrill Lynch & Co. and UBS AG lowered their 2007 and 2008 profit estimates for Countrywide today, citing the deteriorating market for home loans. AXA, Europe's second-biggest insurer, cut its stake in Countrywide to 4.1 percent from 11.1 percent, the company said in a regulatory filing.

To contact the reporter on this story: Bradley Keoun in New York at bkeoun@bloomberg.net .