Business Insight Zone

It’s hard to keep track these days.

Accredited Home to cut 1,600 jobs; halts lending
Accredited Home Lenders Holding Co said on Wednesday it will shut most of its mortgage business to help survive turmoil in subprime lending, and eliminate 1,600 jobs, or 62 percent of its work force.

First Magnus Files Chapter 11
First Magnus Financial Corp., an Arizona mortgage lender that shut down operations and laid off nearly 6,000 workers last week, on Tuesday filed for Chapter 11 bankruptcy protection from its creditors.

Want one that’s even scarier? Try this, which repeats the Accredited Home news but puts it in more context.

Lehman, Accredited, HSBC Shut Offices; Crisis Spreads
The rising cost of credit took its toll on Lehman Brothers Holdings Inc., Accredited Home Lenders Holding Co. and HSBC Holdings Plc as the subprime mortgage fallout spreads through the economy.

Lehman, the biggest underwriter of U.S. bonds backed by mortgages, became the first firm on Wall Street to shut its subprime-lending unit and said 1,200 employees will lose their jobs. Accredited, reeling from its canceled purchase by Lone Star Funds this month, stopped making home loans. London-based HSBC, Europe’s largest bank by market value, closed a U.S. mortgage office after failing to finance new loans.

Mortgage lenders today announced plans to fire 3,700 people as the slump that began in subprime mortgage bonds reaches beyond mortgages to companies seeking money in the corporate debt markets.

HSBC may be 142 years old, but it bet heavily on subprime loans and has been hurting for months. But Lehman? Like Bear Stearns, which recently had to shut down two worthless subprime hedge funds, Lehman’s one of the pillars of Wall Street.* Two quick observations, made many times already but still worth repeating.

1. The subprime mortgage collapse affects far more than the subprime mortgage market.
2. You can expect more nouveau mortgage companies to take a beating in this environment, but not even old-line, white-shoe firms are safe.

The whole US financial sector is living in interesting times . . .

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* Addendum, Thursday morning: I neglected to say that the Lehman in question is BNC Mortgage. More details in this story from today’s NYT, which includes this gem:

In the last nine months, about 120 mortgage lenders have shut or declared bankruptcy, according to Lehman.

It’s sad to think of all the folks out of work, in the current batch of closures and overall, and even worse when you consider that this could go on for a while.