Mexico ramping up oil and natural gas production following Hurricane Dean…Cyberonics laying off more employees…More than 38,000 jobs lost at mortgage lending institutions so far this year…
Two of Mexico’s three main oil-exporting ports in the southern Gulf of Mexico have been reopened following the passage of Hurricane Dean. Production is still suspended as officials assess possible damage to offshore rigs. Dean struck the eastern Yucatan Peninsula as a Category 5 hurricane. It had weakened to a Category 1 storm by the time it arrived Tuesday in Mexico’s main oil-producing region in the Bay of Campeche. Mexico’s state-owned oil monopoly Pemex says it has 10.5 million barrels of crude in storage that would resume shipping as soon as the ports reopened.
Houston-based Cyberonics is laying off another 60 employees, or about 12 percent of its work force, according to the Houston Business Journal. The medical device maker laid off 15 percent of its employees in May, or about 90 workers, to reduce operational costs. The recent non-coverage determination by the Centers for Medicare and Medicaid Services resulted in reduced sales of VNS Therapy Systems for treatment-resistant depression patients.
Rates on 30-year, fixed-rate mortgages have dipped to their lowest point since late May. The news suggests the cost of financing eased for borrowers who were able to get a mortgage. Finance giant Freddie Mac says the average this week is at 6.52 percent, down from 6.62 percent last week. Rates on 15-year fixed mortgages dipped to 6.18 percent, down from 6.3 percent last week. For one-year adjustable-rate mortgages, the average was 5.6 percent, compared with 5.67 percent a week earlier. Mortgage rates slipped after the Federal Reserve decided to reduce its lending rate to banks, hoping to calm some of the recent turmoil on Wall Street about the credit crunch.
Countrywide Financial Corporation says Bank of America has made a $2 billion investment in the company. Countrywide, the nation’s largest mortgage lender, is trying to weather a credit crunch that’s rocked Wall Street and the mortgage industry. Under the terms of the deal, Bank of America acquired $2 billion in the form of nonvoting, convertible preferred stock yielding 7.25 percent annually. The shares can be converted into common shares of Countrywide at $18 per share, with certain restrictions. Bank of America says if it were to convert its shares under Countrywide’s current share count, it would hold between 16 percent to 17 percent of Countrywide shares. That would make Bank of America the company’s largest shareholder.
Lehman Brothers Holdings has announced it is closing its sub-prime mortgage business because of the trouble in the home lending industry. The Wall Street brokerage says it is shuttering its BNC mortgage unit, which issues home loans to people who cannot document their income or have shaky credit histories. Lehman will shed 1,200 workers in 23 offices. Closing the business will cost $25 million in severance pay and real estate and technology costs. Lehman says it will continue to issue home loans through its Aurora loan services unit. Mortgage lenders around the nation, especially sub-prime lenders, have been closing down in the past month as deteriorating credit quality has drained the cash available to the industry.
Since the start of the year, more than 38,000 workers have lost their jobs at mortgage lending institutions. That’s based on recent company layoff announcements and job cut data complied by global outplacement firm Challenger, Gray and Christmas. In addition, construction companies have announced nearly 20,000 job cuts this year. The National Association of Realtors expects membership rolls to decline this year for the first time in a decade.
Houston-based Amstar Mortgage laid off most of its corporate staff in Houston late last week, blaming poor market conditions. The company has partnered with The Money Store to operate its 109 branches nationwide, saying many large lenders owe Amstar Mortgage “substantial money.” The deal allows all branch offices and branch employees to continue operating. The mortgage company is a subsidiary of Houston-based Amstar Financial Holdings.
Building materials company Louisiana-Pacific Corporation is closing a southeast Texas mill and temporarily ceasing some production at a Wisconsin mill. The Nashville-based company blamed a downturn in new home construction. The Silsbee, Texas, mill makes oriented strand board. It’ll shut down indefinitely, effective immediately, idling 147 workers. The company also says it’ll curtail oriented strand board production until October 31st at its Hayward, Wisconsin, plant. LP’s composite wood siding production will continue at Hayward. Moody’s Investors Service last month downgraded LP’s outlook to “negative,” expecting weak pricing for the company’s home building materials.
New York Senator Charles Schumer is urging federal regulators to do more to help homeowners struggling to pay their mortgages. The Democrat made his plea in a letter to Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke. Schumer has asked Paulson and Bernanke to support a plan in Congress to provide $100 million to nonprofit housing groups to help troubled sub-prime borrowers refinance their homes. Riskier borrowers have been hardest hit as interest rates have risen and home values have weakened. As a result, foreclosures and late payments have soared. The credit crunch, which started with these homeowners, has spread to other borrowers. Schumer is a member of the Senate Banking Committee.