Mortgage company closes office in Kent County

GRAND RAPIDS (NEWSCHANNEL 3) - The American dream is becoming a nightmare for more and more homeowners and lending companies.

The sub-prime mortgage mess has now cost local employees their jobs at the lending giant Countrywide.

An estimated 1.7 million foreclosures are expected in the U.S. by the end of 2008. Most of them caused by sub-prime mortgages, loans made to people with weak credit.

They start with low interest rates that jump to higher, and often unaffordable rates down the road.

Countrywide closed offices in the Grand Rapids area, laying off workers. This collapse of the lending market is hitting home.

It's not just Countrywide, people in the lending industry gave us a list from a site that tracks lending companies going under. From the end of 2006 to now the list is at 161 and counting.

Joe Lennon financed his home with a loan that was bought by Countrywide Lending but with Countrywide closing offices, he wonders whether he'll drown in loan debt.

"A direct concern would be as far as the mortgage goes, if there would be problems with countrywide as far as the payments on the taxes and the insurance," said Lennon.

There used to be people sitting at desks processing loans, but on this day Countrywide employees were told to pack up, as the office closed its doors.

"For a while people operate with fat pockets and then when things dwindle people start shaving," said mortgage broker Zac Ellerbroek.

Ellerbroek is a mortgage broker and says Countrywide's layoffs are a sign of what will happen in the next six months, lenders cutting staff, going under, the days of easy loans are over.

"Banks being flexible to lend money to people is not there any more, they've really tightened down the hatches and gotten back to the old ways of lending, you have to document your income," said Ellerbroek.

The collapse of lending has also hit titling companies like Sun Title.

"We had quite a few deals in the pipeline so to speak late spring, once this crunch hit in July and August we saw a lot of those programs go away," said CEO of Sun Title Thomas Cronkright.

The company's CEO says titling is better off compared to lenders, and that the nationwide collapse of the housing market is good longterm.

"We'll have a tighter lending market, so those who are serious about home ownership will be able to have a home," said Cronkright.

With home sales declining, and lenders closing after making bad loan decisions, people we talked to weren't surprised by Countrywide's layoffs, they're surprised it's not happening more.

"I see the housing market going down, and then something in the economy hopefully will turn to bring it back," said Lennon.

The people we talked to say because lending companies have sensitive information like social security numbers they often can't give two weeks notice. That could be why Countrywide employees were told to clean out their desks as the office was shut down and sensitive material was secured.

So how do we solve this mess?

It still has to be worked out, but Wednesday lawmakers urged the president to appoint a housing czar to oversee the response.

They say a crackdown on lending abuses should have come years earlier, but the White House says Congress has been to slow in their own action.