Uh-oh More Mortgage Co. Woe

There were 6,555 layoffs in the U.S. mortgage industry between November 2005 and April 2006, according to the trade publication National Mortgage News.


"A slowdown in the mortgage industry has claimed Liberty Home Loan Corp. as a victim. The Tampa-based company, which at its peak had as many as 110 employees and six offices, shut its doors late last year and filed for Chapter 7 bankruptcy April 25."

'"There are more people in the industry than the industry can support," said Michelle Taylor, president of Taylor Lending Corp. in Sarasota and a board member of the Gulf Coast chapter of the Mortgage Bankers Association of Florida."

"Liberty's co-owners, Tim Frederick and Steve Capen, each filed for Chapter 7 personal bankruptcies at the same time. They had personally guaranteed Liberty's debt after hitting financial difficulties in 2004, two years after they launched the company."

"Liberty is among a handful of mortgage companies that have gone out of business as the housing market cools and the mortgage industry gets tighter."

MortgageDaily.com, an online news source for the mortgage industry, reported the closing in April and May of three large firms:

San Francisco-based Capital Alliance Funding Corp.; QuoteMeARate.com., based in Houston; and Merit Financial Inc. in Kirkland, Wash.

Dozens of other mortgage companies are "teetering on which way to go," said Sam Garcia, editor of MortgageDaily.com.

"Ameriquest, one of the nation's largest subprime mortgage lenders, is restructuring and eliminating retail branch offices."

"Wachovia Corp.'s (NYSE: WB) planned $25.5 billion purchase of Golden West Financial Corp. (NYSE: GDW), the parent company of World Savings Bank, a major residential mortgage lender, is a sign of consolidation in the industry, Garcia said."

"Rising interest rates on home loans and tougher underwriting standards have put pressure on all mortgage companies, especially those opened in the last five years, said Joseph Falk, the Miami-based legislative chairman of the National Association of Mortgage Brokers."

"When interest rates were falling, it was easy to hire staff and put loan officers to work because there were more customers than mortgage originators available, Falk said. The industry ramped up, and new companies opened to fill the void. But with rising rates, there are fewer customers. Nationally, new loans fell by nearly 20 percent in the first quarter of 2006."

'"As production falls, this leads to overcapacity of loan officers and mortgage companies," Falk said. "There are not enough loans to go around."'