Merrill Lynch CEO Stan O’Neal appears to be on the way out after subprime bets soured when rising mortgage defaults brought the secondary market to its knees. It is believed that his severance package could be as high as $200 million, not bad for delivering the worst news in the firm’s 93-year history. Countrywide Chief Angelo Mozilo told a panel in Beverly Hills that there would likely be more trouble ahead in the housing market. Mozilo said he didn’t think the worst is over, noting that falling home prices will likely make matters worse for many subprime borrowers who have no equity in their homes and few options to refinance. He urged lawmakers to make credit more accessible to homeowners. UBS warned that it is at risk of “further deterioration in the U.S. housing and mortgage markets as well as rating downgrades” on its portfolio of mortgage-backed securities. The warning could mean more writedowns for bad loans in the fourth quarter, though the Zurich-based bank still expects a third-quarter loss between $515.8 million and $687.7 million. According to the Council of Mortgage Lenders (CML), home prices in the UK will edge up by just 1% in 2008 while property sales are expected to fall by 15%. The group also expects the number of repossessions to rise by 50% during the year, from 30,000 this year to 45,000 in 2008, the highest level since the 1990s housing crash. Bank of England data showed mortgage approvals fell to 102,000 in September, the lowest since July 2005. The Blackstone Group’s chance of abandoning its $1.8 billion purchase of the mortgage and fleet lease business of PHH Corp. is growing, according to people familiar with the deal. Recently I was told that PHH Mortgage laid off 140 employees in Providence and another 300 from offices in New Jersey and Florida. Chase Home Finance announced that it would be closing its 430-employee mortgage service center in Lexington, Kentucky, though the company will create 270 jobs at its Monroe mortgage service center during the next 10 months, according to a Chase Bank spokesman. The move is a “reflection of a decline in the home equity origination market” as home equity loan originations were down 16 percent during the third quarter. Bear Stearns announced further job cuts as part of its year-end planning process. After being battered by subprime losses which saw two of its hedge funds collapse this past summer, the firm will cut 300 more jobs, or 1.9% of its workforce in business units at all levels of the organization. RealtyTrac said the number of foreclosures in Connecticut cities increased at least 400 percent in the first half of 2007 compared with the same period a year ago. Foreclosures skyrocketed 547 percent in the New Haven-Milford area, 522 percent in the Bridgeport-Norwalk-Stamford region, and 446 percent in the Hartford area. State Attorney General Richard Blumenthal said his office has been inundated with calls from homeowners seeking assistance. Citi continues to make its mortgage push as the banking giant recently launched the new look Mortgage.com which it acquired when it bought the mortgage arm of Dutch Bank ABN Amro back in January. Citi Residential Lending a wholesale non-prime mortgage unit, was also launched in mid-September. Lastly, I’ve been told that more than 100 employees were terminated last week at First Franklin Financial, the wholesale lending unit of Merrill Lynch. And by terminated, I don’t mean laid off.
