Falling Like Dominoes: E-Loan Next Major Bank to Get Hit By Sub-Prime Mortgage Woes

November 27th, 2007 • Related • Filed Under • by admin

For the last few years, you could fall over backwards and get a mortgage. You could get a loan just by telling someone on a handshake what your income is without ever even proving that fact with documentation. Mortgage companies were selling people loans that amortized over 50 years and loans in which the payments didn’t even pay the interest off each month, so the amount owed actually increased over time! It’s no surprise that major banks got burned by a wave of foreclosures for originating these really bad loans. We first reported that E*Trade and Bank of America were facing major financial problems because of all of the sub-prime mortgages they had on their books, and now it looks like E-Loan is the next major bank to be hit by the sub-prime mortgage mess.

As part of our advertising strategy, American Consumer News has the option to advertise some of E-Loan’s products. We recently receive a message from them which stated the following, “In order to stay ahead of the current mortgage cycle and enable E-LOAN to maintain its leadership position in the industry, E-LOAN will begin scaling back some operations/programs to reduce its cost structure.” The program they were mentioning in the e-mail was its internet affiliate advertising program.

E-Loan made no statement as to what other divisions and programs they would be scaling back. E-Loan will likely also be laying off a number of employees as they stated there will be a “resizing of E-LOAN’s work force and reduction in cost.” The cost cutting measures seems to be of quite a significant size and a company-wide activity. These actions indicate a clear lack of capital, and in order to be able to remain profitable, E-Loan will significantly need to cut-back on their business expenses.

It’s no surprise that more of the major banks are being hit by financial problems because of the sub-prime loan debacle. Almost all of the major nation-wide banks are hurting because they over-extended credit to people who in all honesty could not afford to pay them back. E*Trade, Bank of America and E-Loan are the first banks to reveal how public their financial problems are, but there is no doubt that more banks will come forward and make drastic changes in order to remain profitable.

Late breaking rumors even indicate that there may be massive lay-offs at Citibank in the near future. Upwards of 45,000 people could be laid off, possibly even today. We’ll be sure to keep you informed about any major announcements the company makes.

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