Dot.Com Downsizing

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Mortgage.com Unwinds Operations, Cuts Most Staff
By Jamie LaReau
NEW YORK (Reuters) - Mortgage.com Inc. (NasdaqNM:MDCM - news), an online mortgage banker, the latest Internet business to hit financial difficulties, on Tuesday said it would begin winding down its lending operations and lay off most of its employees.
The Sunrise, Fla.-based operation said it could not pay back bank loans, and planned to sell the rights to its Internet address to raise money. It will lay off 518, or 84 percent, of its 618 employees.
The news sent shares of Mortgage.com plummeting as it closed down 79 percent at about 9 cents on the Nasdaq Tuesday. The stock has a 52-week high of $9-7/8.
Mortgage.com is the latest dot-com operation to hit problems as online businesses find it hard to get venture capital money or loans to stay afloat. Last week, Stamps.com Inc. (NasdaqNM:STMP - news), an Internet mailing and shipping service, said it would cut its work force by 40 percent in an effort to lower costs. Other big Internet companies to recently see top executives resign or make cuts in staff include, NBC Internet Inc. (NasdaqNM:NBCI - news), an online media company, AltaVista, the Internet search service owned by CMGI Inc. (NasdaqNM:CMGI - news) and WebMD (NasdaqNM:HLTH - news), an Internet health care firm.
Mortgage.com said higher interest rates made it more expensive for it to borrow money in order to lend to customers. Higher interest rates have also discouraged potential customers from taking out loans and has increased the risk that borrowers might default on loan repayments, said Mortgage.com in a statement.
The downturn in the dot-com market has also hurt its business, hindering it from raising additional capital, the company said.
Mortgage.com said in a statement it failed ``to raise sufficient capital to reach profitability,'' and was in violation of covenants regarding liquidity and tangible net worth. It said it had reached a preliminary agreement with its warehouse lenders that will allow it to continue to close certain loans in its pipeline and sell loans in its warehouse lines. That means that Mortgage.com will be allowed to carry on servicing any outstanding loans it has with its customers.
Once the other lending operations are wrapped up, the company plans to sell its CLOser software system, its Florida call center and the rights to its URL http://www.mortgage.com, the company said.
Mortgage.com said it will release its third-quarter earnings results on Nov. 14.