WMC Mortgage laid off 460 employees Thursday, and has stopped making zero-down loans or loans to borrowers with FICO scores below 600.
A spokeswoman for WMC, Brandie Young, said the affected employees were given “non-working” 60-day layoff notices, meaning they were not to report to work today. The layoffs, which represented about 20 percent of WMC’s workforce, were undertaken companywide, she said.
“We’ve restructured ourselves to retain a stung position in the market, and feel these actions have done that for us,” Young said. “We’ll be able to keep our efficiencies and focus strong. There certainly will not be any adverse impact in service or funding times as a result.”
Analysts at UBS securities data recently projected losses of 14.81 percent on mortgage-backed securities issued by Morgan Stanley and backed by WMC loans. Young said she had no comment on UBS’ projections for the BBB- class issue, MSAC 2006-WMC2.
“Our guidelines change constantly,” Young said of WMC’s decision to stop making zero-down loans or loans to borrowers with low credit scores. “The industry is fluid, and like all lenders we will constantly review underwriting decisions based on current market conditions.”
A unit of General Electric Co., Burbank, Calif.-based WMC is the fifth-largest U.S. subprime lender, with $33 billion in loans funded last year, according to Bloomberg.
In a report released in December by the California Reinvestment Coalition, WMC was identified as the third-largest “higher-cost” lender in California in 2005. The report was based on a Federal Reserve analysis that defined higher-cost loans as those carrying an annual percentage rate exceeding 3 percent of the rate for Treasury securities of comparable maturity.
WMC’s 46,755 higher-cost loans in California placed it behind New Century Mortgage (52,270 loans) and ACC Capital (including Ameriquest, Argent Mortgage and Town & Country Credit Corp.) with 50,238 loans.
New Century said Thursday that it had stopped funding loans because of difficulties obtaining credit from its lenders, and analysts say the company is now facing bankruptcy.
ACC Capital announced in May that it was closing its Ameriquest and Town & Country branch offices and laying off 3,800 employees.
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