Mortgage crisis widens at Accredited, HSBC, Lehman
Mortgage crisis widens at Accredited, HSBC, Lehman
Wed Aug 22, 2007 7:41PM EDT
By Jonathan Stempel
NEW YORK (Reuters) - Fallout from the U.S. mortgage and credit crisis spread on Wednesday as Accredited Home Lenders Holding Co, HSBC Holdings Plc and Lehman Brothers Holdings Inc announced job cuts and concern mounted about the longer-term impact on the economy.
Mortgage lenders announced plans to cut more than 4,000 jobs, bringing the total of announced housing-related job losses since Thursday to more than 12,600. Many of the cuts related to subprime lending, which involves loans to people with weaker credit.
"There is no functioning subprime market," said Bose George, a Keefe, Bruyette & Woods Inc. analyst. "This is the only way to weather the storm. Cut the work force, stop making loans they can't sell, and hope things get better."
Despite the problems, U.S. stocks advanced on Wednesday as takeover activity resurfaced, and investors gained confidence that the credit markets could stabilize, especially if the U.S. Federal Reserve cuts interest rates.
Accredited, a San Diego-based subprime specialist, will cut 1,600 of its 2,600 total jobs and shut most of its retail and wholesale operations by September 5. It also stopped taking loan applications.
Lehman, one of Wall Street's biggest mortgage bond underwriters, will close its Irvine, California-based subprime unit BNC Mortgage LLC, get rid of 1,200 jobs, and take $52 million in charges. It plans to continue making mortgages through its Aurora Loan Services LLC unit.
London-based HSBC, Europe's largest bank, will close a Carmel, Indiana, office and cut 600 jobs.
Many lenders face a credit shortage because investors will not buy debt they consider less than pristine, including asset-backed commercial paper backed by such things as mortgages.
Liquidity problems have spread beyond subprime lenders and raised fears of a global credit shortage as defaults mount, investors stop buying loans, and bankers refuse to extend credit to lenders. |
