Accredited Halts New Loans and Cuts 62% of Workforce

| About: Accredited Home (LEND)

Mortgage lender Accredited Home Lenders Holding Co. announced Wednesday that it was no longer accepting new mortgage applications and will cut 1,600 jobs. The layoffs represent 62% of the company’s workforce, and will also lead to a shutdown of 60 retail branches and 10 wholesale LEND 23 08 2007 Chartoffices. Accredited will honor “existing commitments,” and does plan on resuming wholesale loan originations when the market recovers. "This is the only way to weather the storm, cut the work force, stop making loans they can't sell, and hope things get better," Bose George, a Keefe, Bruyette & Woods Inc. analyst, commented on the plan. On Tuesday, the company announced it would sell $1 billion worth of home loans to lower exposure to margin calls to an unnamed investor (full summary). Accredited also has plans to take Lone Star, a private equity firm, to court in order enforce a deal under which Lone Star agreed to acquire Accredited for $400 million (full summary). The deal had been agreed up on June 4th, but Lone Star has made claims that Accredited breached the merger agreement. Bose George stressed the importance of the court decision: "A lot of the value in the shares is based on whether the lawsuit succeeds, either through a merger or cash settlement." Accredited closed down 6.9% to $6.10 on Wednesday, but gained 6.6% back in AH trading on news that Bank of America took a $2 billion stake in Countrywide Financial, igniting hopes that the worst of the sudden mortgage lender crisis may be over.

Sources: Wall Street Journal, Reuters, MarketWatch
Commentary: Bank of America Invests $2B in Countrywide: Who Wins?Lone Star, Accredited Deal is Still On - For NowAccredited Home Lenders is on Life Support
Stocks/ETFs to watch: LEND, CFC, BAC. Competitors: WFC, FNM, FRE. ETFs: KBE

Seeking Alpha's news briefs are combined into a pre-market summary called Wall Street Breakfast. Get Wall Street Breakfast by email -- it's free and takes only seconds to sign up.

About this article:

Want to share your opinion on this article? Add a comment.
Disagree with this article? .
To report a factual error in this article, click here