Countrywide announced Friday, after hours, that they would be laying off between 10,000 and 12,000 employees over the next few months. This adds up to approximately 20% of their workforce. Countrywide management apparently is expecting things to get worse before it gets better, even after the combined 13.5 Billion dollars invested into the company (11.5 Billion credit line, and ~2 Billion investment by Bank of America).

What with the doom-and-gloom forecasting going on throughout the media, it doesn’t look too promising for the short term. The unexpected report of the 4000 non-farm payroll positions also continued to emphasize the downward spiral that the ‘experts’ see us entering. Even the word ‘Recession” has been bantered around on some of the more popular news outlets.

What does this mean for the middle class person, just getting by??

For the Middle Class;

• Mortgage Qualifications Becoming More Stringent - Due to the high number of Sub-Prime mortgages and ARM-based mortgages that are going to default, banks and other lenders are going to be screening their loans much more carefully. This means that a lot more ‘marginal’ people won’t be able to qualify for new mortgages. For those that were planning on re-financing their existing Adjustable Rate Mortgage when the rate increase hit, it will be very difficult if not impossible to find another mortgage to move to.

• Housing Prices Continue Downward - With more houses defaulting and going on the market as banks are forced to foreclose, the housing glut we’re seeing now won’t be abating anytime soon. Until the Looong inventory of existing houses are sold, it will be a buyer’s market on housing. If you can get a good mortgage, now might be the time to start at least looking for that next house.

• Credit Becoming Tighter - As banks tighten mortgage qualifications, this tightening will carry over to regular credit (CC’s, HELOCs, etc). Meaning that it will be harder or more expensive to get the new car, the home improvement loan, or hardest, uncollateralized (signature) loans. Those with good credit could see their interest rates going up because of Universal Default Clauses if they so much as miss a single payment.

But is there any good news???

I believe there is. After a certain point, investments are going to be a bargain for those with savings to take advantage of it. Eventually businesses will need operating capital, and if the banks are not willing to step up, private investors can get into the investment arena and make some serious returns (via Stocks, Bonds, Mutual Funds, etc.) for the companies that are in good financial shape, but whos’ valuations have been lowered by the overall market downturn.

I’m saving up as much as possible and jumping in the market in about 5-6 months when I believe things are going to radically turn around. It might be sooner, or it might be later, but eventually things get better.

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