We haven’t even gotten to the worst part yet, and home lenders are falling like flies. American Home Mortgage is the latest. What about Countrywide, and others?
Numerous mortgage lenders have gone out of business in recent months, but American Home Mortgage is one of the largest to be hit by problems. It minted 59 billion dollars in loans last year, up from 45 billion in 2005.
In a statement late Thursday, the home loan giant said it had stopped taking new mortgage applications and had told most of its employees they would be laid off Friday.
“The company employee base will be reduced from over 7,000 to approximately 750,” the distressed firm said.
Another big firm, Countrywide Financial, reported a steep drop in its latest quarterly profit last month. The lender said coming months were likely to be “increasingly challenging.”
Countrywide Financial’s shares were down over six percent at 25.03 dollars in morning trading amid wider market losses.
The ripple effect is huge. But we have only seen the tip of the iceberg. If Countrywide is already in trouble, you can imagine what it will be like by Christmas. These bad loans are going to continue going sour for at least three more years. Three freakin years.