Wednesday, August 22, 2007

Financial job cuts soar on housing woes

Financial job cuts soar on housing woes
By Jonathan Stempel

NEW YORK (Reuters) - A deepening U.S. housing slump has caused an alarming surge in job losses at U.S. financial services companies, and the end is nowhere in sight, consulting firm Challenger, Gray & Christmas Inc. said on Tuesday.

The industry has announced 87,962 job cuts so far this year, 75 percent more than the 50,327 recorded for all of 2006, Challenger said. Nearly one-fourth of this year's cuts have been announced in August alone.

Of this year's cuts, 35,830, or 41 percent, were tied to housing market troubles, including riskier subprime mortgages. Job cuts by real estate and construction firms totaled 21,620, more than twice the number for all of 2006, Challenger said.

"Many companies expected the mortgage situation to implode; they've just been wondering when the bubble would burst," Chief Executive John Challenger said in an interview. "But many are stopping on a dime, shutting down operations.

"Companies are not surprised by what's happening, but the reality of the situation and the speed with which it occurred is shocking," Challenger added. He said it could be months before housing-related job cuts peak.

In the last week, investment bank Bear Stearns Cos, credit card issuer Capital One Financial Corp and mortgage lenders Countrywide Financial Corp and First Magnus Financial Corp announced 8,640 mortgage-related job cuts, Challenger said.

Another 2,400 cuts were announced by SunTrust Banks Inc as part of the bank's existing cost-cutting program.

Many companies exposed to the housing market have struggled with rising delinquencies and foreclosures as mortgage rates have reset higher and housing price appreciation has slowed.

Meanwhile, credit conditions have tightened as investors have grown unwilling to buy home loans once thought safe, starving many lenders of cash they need to operate normally. Dozens of mortgage lenders have quit the industry this year.

April has been the year's busiest month for financial job cuts, Challenger said. That month, companies announced 33,789 cuts, including 17,000 by Citigroup Inc and 3,200 by bankrupt mortgage lender New Century Financial Corp.

Job cuts are mounting as credit losses widen.

On Tuesday, the government's Office of Thrift Supervision said troubled assets, or loans at least 90 days past due, rose at savings and loans it regulates to $14.2 billion in the second quarter from $9.5 billion a year earlier.

Meanwhile, home foreclosure filings in July surged 93 percent from a year earlier and rose 9 percent from June, to 179,599, according to a Tuesday report by research firm RealtyTrac.

John Challenger said it's understandable for mortgage workers to feel whipsawed. Countrywide, for example, cut 500 jobs last week after having added 6,931 jobs from January to July, with increases in every calendar month.

"It's devastating (for morale)," he said. "It's hard to keep morale up, given the boom-bust nature of the mortgage sector."

(Additional reporting by John Poirier and Patrick Rucker in Washington, D.C.)