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Guaranty Residential to Ax Jobs, Sell Servicing Portfolio

Guaranty Residential to Ax Jobs, Sell Servicing Portfolio$8 billion servicing portfolio sale, 1500 mortgage layoffs

October 6, 2004

By COCO SALAZAR

A Texas mortgage banker is shaking things up in an effort to offset disappearing refinance business. In addition to cutting more than a thousand mortgage jobs, Guaranty Residential is selling an $8 billion servicing portfolio.

The latest news regarding Temple-Inland’s continued effort to reposition mortgage origination activities is that 1,500 jobs will be affected by the actions, according to press release issued Monday.

The layoffs will affect both mortgage origination and servicing employees of the company’s mortgage arm, Guaranty Residential Lending Inc., Temple-Inland spokesman Chris Nines told MortgageDaily.com.

The sale of the $8.1 billion third party portfolio, announced in September, followed a previous announcement that Temple-Inland would close down many of Guaranty Residential’s retail offices to further reduce costs, earnings volatility, and exposure to changing market conditions such as a slowdown in refinance activity.

The staff reductions and portfolio sale are expected to substantially be completed within this quarter. While the strategy behind these moves is to keep costs and risks low, it is unclear what the savings will be, Nines added.

“These changes are difficult because of the impact on affected employees,” Temple-Inland chairman and CEO Kenneth M. Jastrow II said in a written statement. “The company will provide access to multiple resources to assist employees in this transition.”

Mainly due to the recent reduction in long-term interest rates and the decision to sell the portfolio, the third quarter’s operating income for financial services is expected to jump about $15 million, the provider of corrugated packaging, building products and financial services reported. Despite the increase in the mortgage servicing allowance, the operating income will reportedly be comparable to that of the third quarter 2003.

An after-tax special charge of approximately $13 million will result from asset write-downs associated to the sale of the retail mortgage production offices, severance, and transaction costs from the sale of the servicing portfolio, according to the announcement.


Coco Salazar is an assistant editor and staff writer for MortgageDaily.com.email: s3celeste@aol.com

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