Sallies Mae, the largest payday lender in the United States, is experiencing a major restructuring as its mortgage-lending business continues to struggle, raising questions about whether its high interest rates are causing a financial crisis.
On Wednesday, Sallier Mae announced that it was cutting 10,000 jobs, as part of a deal that includes an agreement to eliminate a $3 billion in debt.
The restructuring is expected to save the lender about $2 billion, the company said in a statement on Wednesday.
Sallister Mae said it expects to close all of its current and former consumer loans, as well as consolidate existing loans.
It will also refinance up to $1.5 billion of mortgage-backed securities, which is the amount of money the company can borrow at any given time.
The company’s mortgage-based loans accounted for nearly 70% of its total loans in 2015, according to data compiled by Bankrate.com.
Smerconish, a credit reporting agency, reports the average loan with a mortgage is $10,000.
Sallister has been struggling since it went public in 2016.
It lost $4 billion in 2016 and 2018.
S&M Holdings Inc., the parent company of Sallistem, took a $2.7 billion stake in the company in 2018.
The companies’ combined debt has ballooned to $20.9 billion, according the company.
That’s up from $18.7 million at the beginning of 2018, according a S&am news release.
S&:M Holdings has said the company is in a financial “pivot” and will refinance loans, but that it is still evaluating whether it will be able to continue operations.
The lender is expected “to take several actions to support its financial health,” the company’s chief executive, Kevin J. O’Neill, said in September.
The move comes as other lenders, including JPMorgan Chase & Mankiw, have also announced significant job cuts.JPMorgan Chase &ammakiw said on Wednesday it was eliminating 8,000 full-time jobs and shedding 2,200 full-timers.
J&’s chief financial officer, David M. Baker, said the changes are part of “a plan to focus our capital resources on growth and profitability.”
SallisteMaid is the largest US lender with more than $2 trillion in assets.
SmeeMaiden, which the company bought in 2019 for $4.2 billion in cash, is in its third year of operations.
Smee Mae has been under pressure since a series of mortgage defaults in 2016, which left some borrowers with hundreds of thousands of dollars in debt, or about $5,000 per borrower.
The S&ams loans are used by borrowers with a credit score below 300, or below 500.