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South Florida mortgage firms lay off hundreds of workers

MIAMI – Sept. 11, 2007 – The dramatic collapse of the nation’s mortgage markets has hit home in South Florida, with almost 800 people losing their jobs in recent months as lenders slash operations.

Statewide, the financial services industry has eliminated more than 2,800 positions since the beginning of the year, according to Challenger, Gray & Christmas, a Chicago-based outplacement consulting firm.

That’s a sharp retreat from the boom years between 2000 and 2005, when mortgage companies grew quickly as they sold adjustable-rate and interest-only mortgages to consumers trying to get into homes some ultimately couldn’t afford.

With declining property values and rising interest rates now leading to mortgage defaults and foreclosures, demand for those loans has dried up and lenders are trimming payrolls or shutting down.

“The layoffs have impacted an industry that expanded like wildfire in recent years,” said Alex Garcia, vice president of 1st Interstate Mortgage in Delray Beach.

As mortgage companies scale back, potential borrowers across the region are left with fewer choices for home loans. Surviving lenders are swamped, and it’s taking longer to process consumers’ mortgage applications.

Gene Petrino, president of Midas Mortgage in Pompano Beach, said companies that remain in business face big backlogs.

“Some loans are falling through because of that,” he said.

Lenders are tightening credit standards, turning away borrowers without sufficient incomes, down payments or credit ratings.

Sergio Grady, 59, is trying to refinance his Hollywood house. But his mortgage broker told him one application with a potential lender hit a snag because Grady is a telephone operator for a Fort Lauderdale hotel, not a higher-paying concierge.

“He said, ‘Well, we’re going to have to go somewhere else,’” Grady said. “The bank is asking for me to show more money.”

With borrowers struggling to get mortgages, fewer prospective buyers will be looking for homes and condominiums, analysts say. South Florida’s depressed home sales are expected to remain weak at least into 2008, partly because of the mortgage mess.

“There’s a shakedown everywhere,” said David Dweck, president of the Boca Real Estate Investment Club. “It’s having a domino effect.”

Still, the lending landscape is far from hopeless, said George Richardson, president of PayZero Mortgage in Fort Lauderdale. He insists borrowers still can get loans, particularly for less-expensive properties, even if the transactions take longer to complete.

Fannie Mae and Freddie Mac guarantee loans for single-family homes up to $417,000. Such loans are attractive to investors because they are considered safe bets.

“Consumers are very fearful,” Richardson said. “But I think the perceptions are worse than reality.”

Last month, Atlanta-based HomeBanc Mortgage Corp. laid off 80 employees in Palm Beach and Broward counties after the lender announced it was getting out of the mortgage business. The company subsequently filed for bankruptcy protection.

Peggy Richardson, HomeBanc’s director of marketing in South Florida for two years, was one of those who lost her job. She is not related to George Richardson.

“It was always considered a high-value, ethical company,” she said. “But we were let go without getting paid for our accrued vacation time or any severance. We were left with nothing.”

Like other former colleagues, Peggy Richardson is trying to find work in a different line of business. “Most everyone is looking outside, considering the state of the mortgage industry right now,” she said.

First Magnus Financial Corp. told the state that it laid off 142 workers in Palm Beach Gardens and Fort Lauderdale last month, while Boca Raton’s First NLC Financial Services, a lender that makes loans to people with bad credit, cut 154 jobs in August and September.

Last week, Cleveland-based National City, which entered South Florida earlier this year, said it’s eliminating 800 jobs in its mortgage division, with a “minimal” number of those positions in Palm Beach County.

Struggling Countrywide Financial Corp., the nation’s largest lender, said Friday it will cut as many as 12,000 jobs as it deals with the challenging conditions in the mortgage industry. The Calabasas, Calif.-based company said previously it slashed 900 loan-production jobs, 225 of them in Florida.

Other national lenders with ties to South Florida have closed offices and laid off workers here but have not notified the state.

Despite the credit crunch and the trouble it’s causing, the mortgage industry ultimately will benefit from the shakeout, said Louis Spagnuolo, vice president of mortgage banking for WCS Lending in Boca Raton.

Spagnuolo said he’s glad to see the demise of lenders who pushed risky loans on clients who couldn’t afford them, which helped fuel the housing boom in the first place.

“In the long-term, I really think this will be better for the consumer,” he said. “We’re going to have more professionalism. I think it’s going to elevate the standards of the whole industry.”

Copyright © 2007 South Florida Sun-Sentinel, Paul Owers. Distributed by McClatchy-Tribune Information Services.