Chase Makes Cuts in Subprime Lending Group
Housing Wire has learned that Chase, the consumer-facing brand of JPMorgan Chase & Co., has given notice to an unspecified number of employees in its subprime lending group as the market for lending to borrowers with less-than-perfect credit has pretty much disappeared. Rumors of the layoffs first surfaced Friday, with sources suggesting that at least 60 employees were affected. Chase spokesperson Tom Kelly confirmed the company's decision to let go of some origination and back-office employees, citing tough market conditions, although he said that Chase remains a subprime originator. "Last week [Chase] gave notice to some origination and back-office employees that their jobs are being eliminated because lower home prices and tougher underwriting standards have reduced the number of qualifying borrowers, and thus the volume of our originations," he said. "In mid-January, 2008, Chase estimated that 70 percent of the subprime mortgages we approved in the fourth quarter of 2006 wouldn't meet the standards of early 2008." The decision to maintain at least a small presence in the subprime market contrasts with competitor Merrill Lynch, which shuttered its entire subprime origination arm, First Franklin, earlier this month as the market for subprime mortgages has essentially vanished. "By remaining a subprime originator, we are positioning our business to take advantage of the opportunity when the appetite for these products returns," Kelly said. The cutbacks at Chase come as the subprime industry has been sent reeling, and hundreds of smaller lenders have shut their doors or gone bankrupt; which is another way of saying that these cuts shouldn't be too surprising. For more information, visit http://www.chase.com.