Mortgage Lenders Who Are Taking a Hit

Oct 7th, 2007 @ 4:42 PM by Alden Smith

Fallout continues in the mortgage market.  Every day brings more news of companies that are struggling or going under because of the shake out in the sub prime market.  Keeping up with them can be a full time task, as more and more report on lost revenue and employee layoffs.  I am listing the ones I found today in search of mortgage news.  These are significant leaders in the mortgage market.

Merrill Lynch

Merrill Lynch warned investors Friday it will post a third quarter loss.  The investment banker and brokerage reports that they blame this situation on bad calls it made on the mortgage and debt markets.  Merrill Lynch says it expects to reveal a loss of up to 50 cents a share when it releases its third quarter earnings.  This profit warning sees Merrill Lynch join a growing list of well-known financial firms anticipating heavy losses tied to the downturn in the US housing market and mortgage-backed securities.

Citigroup

America’s largest banking group by market value warned its third quarter profit would likely fall by around 60 percent due in part to ailing mortgage investments.  The firm took losses of more than $3 billion after writing down securities backed by underperforming mortgages and loans tied to corporate buyouts.  Citigroup has boosted loan loss revenues by $2 billion.  This announcement from Citigroup was the latest disappointment coming from this year’s problems in the mortgage industry and financial markets.

USB

This large Swiss bank has its share of problems, saying it had underestimated the crisis in the US sub-prime home loans credit market.  Because USB is so large, they feel they can absorb this loss.  The bank reports it has taken a hit of 4.0 billion Swiss francs (3.4 billion dollars, 2.4 billion euros) from its worthless sub-prime investments.  The situation was so dire for USB that it removed from their posts its investment banking business head and its financial director.

All these and many more are facing difficulty.  Bank of America, which aided Countrywide Financial in its recent woes, is posting less than expected earning this quarter.  They lay blame on “unprecedented dislocations in credit markets.”  It appears no one is being left out in this meltdown.

Things will not change soon.  The market will remain volatile until the government steps in to put an end to predatory lending practices.  Until then we will see this happen.