"An auction of about 135 foreclosed homes in San Diego Saturday provided more sobering news for mortgage lenders. Ramsey Su, an investor and former real-estate broker who attended, calculated that the high bids for the homes averaged 67% of the prices they fetched when they were last sold, mostly in 2004 or 2005. At a similar auction in San Diego in May, the average was 73%. The auction was held by Real Estate Disposition Corp., Irvine, Calif., which promotes such sales on the www.usahomeauction.com Web site. REDC officials couldn't be reached to comment."
Will this spread to the greater economy?
"Countrywide Financial Corp., reducing costs as part of its effort to weather a credit crunch, has begun laying off employees involved in originating loans, according to an internal email.
The layoffs occurred in the company's Full Spectrum Lending unit, which handles many home mortgages in a category known as Alt-A, or mortgages between prime and sub prime that often involve borrowers who don't document their income. Such borrowers typically don't qualify for a conforming mortgage, the type that can be sold to government-sponsored mortgage investors Fannie Mae and Freddie Mac.
The email, sent to employees Friday by a senior official of Full Spectrum, discussed layoffs made that day but didn't specify the number. The company as a whole employs about 61,000 people. It had a sales force of about 6,800 in Full Spectrum out of a total loan-origination sales force of about 18,000 as of June 30, according to a Securities and Exchange Commission filing.
Less than two weeks ago, Countrywide said it was hiring more loan officers from rivals forced to close down. But the company now is expected to reduce sharply its lending and costs because investor anxiety over rising defaults has made it almost impossible for lenders to sell many types of loans now deemed too risky. That is likely to lead to a steep drop in earnings, at least in the short term, analysts say