Lincoln Service lays off 20% of its work force.

Lincoln Service Mortgage Corp., an industry pioneer in wholesale lending, laid off 20% of its work force last week.

As interest rates have climbed and the volume of home-loan refinances have dissipated, several major lenders, including Countrywide Funding Corp., Pasadena, Calif., have reduced staff sizes in recent weeks.

A 'Gut-Wrenching' Event

The axing of 130 of Lincoln's 639 employees, mostly from its Owensboro, Ky., headquarters, highlights how problematic wholesale lending has become.

Many staffers were also cut from Lincoln's refi-oriented telemarketing operations, said Arthur L. Harreld, president and chief executive officer.

"Anytime there is a layoff, it is very gut-wrenching," Mr. Harreld said.

No Severance Allocation

Lincoln, a unit of Great Financial Corp., "will continue to review its employment levels in light of changing conditions in the mortgage banking industry," he said.

Mr. Harreld said the employees "had not anything more than a short notice" before being fired. He added that those laid off received no severance allocation.

"Many of these employees were hired in a temporary status anyway and they knew they were subject to the interest-rate cycles in this business," he said.

While wholesale lending was the nascent company's original energy source, affinity lending to memberships groups has become a potent new business generator.

Mr. Harreld said affinity lending and retail originations were the lender's outstanding divisions.

Lincoln has been a finalist for several large affinity lending contracts in recent months.

In April, Lincoln snagged the 31,000-strong Eastman Credit Union, Kingsport, Tenn., from PHH US Mortgage Corp., Mt. Laurel, N.J. -- a major coup, according to lenders familiar with the affinity-lending scene.

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