By CHUCK GREEN
An apparently not so uncommon sight these days in the mortgage industry: empty desks.
Not that their occupants are taking five for a foam latte. Instead, they might well have either been steeped in the pink slip blues or were compelled to submit their resignation.
Over the past three months in the industry, there have been more than 3,500 job cuts, according to globalsg.com.
In February, Bloomberg reported U.S. home mortgage lenders might have no other choice during the coming months that to initiate layoffs.
Similarly, earlier this month, wolfstreet.com reported that not only are layoffs among mortgage lenders taking place, but they will also continue.
“Layoffs and forced resignations are certainly imminent in the mortgage banking industry,” said Dan Green, principal at BlackFin Group.
“Simple: Volume’s contracting as rates rise and refinance business dries up. Lenders really only have one, quick means of reducing the cost to produce (cost to close) and that’s reducing headcount,” Green said.
The equation’s simple, he added.
“Productivity equals closed loans per production employee per month. The higher the productivity ratio, the lower the cost to close. Since increasing production isn’t possible, lowering headcount is the only option.”
Some might say the tables have turned.
On the heels of an unprecedented year among independent mortgage banks, profits hit the wall last year, tailing off by 75 basis points, according to the Mortgage Bankers Association’s Annual Mortgage Bankers Performance Report.
In 2021, an average profit of $2,339 on each loan they originated was generated by independent mortgage banks and mortgage subsidiaries of chartered banks. That was a drop-off from $4,202 – a record – in 2020.
Average production volume was $4.9 billion dollars per company. But because of production expenses ballooning to their highest level since 2008, the first year of the MBA’s report, profits took a hit.
Since the twilight of 2019, the number of those employed as brokers for mortgages and other types of loans spiked more than 50% to around 130,000. Then, In August, mortgage rates began percolating.
After adding brokers at a breakneck clip, companies are getting a dose of reality: with business slowing, every employee can’t be moved to other departments.
That said, before initiating the layoff process, lenders might look at borrowers unable to document income and, consequently, fail to meet the standards for mortgages backed by government-sponsored bodies. One thing that could gain momentum is home loans for these borrowers – especially those characterized as “nonqualified mortgages.”
The news doesn’t look good.
According to a list updated earlier this month by truthaboutmortgage.com, PennyMac was expected to cut 155 jobs in Southern California.
It’s projected that Knock will trim its workforce by approximately 46%, while Better Mortgage shored an additional 3,000 jobs in the United States and India.
Mortgage lender Homepoint Capital laid off nearly 10% of its workforce in February, while around 900 were let go by online mortgage lender Better.com.
Wells Fargo and JPMorgan Chase have announced cuts of almost 2,000 roles.
Employees of Movement Mortgage were informed that the company was laying off 1,000 people, according to loansafe.org.
In a recent video, Casey Crawford, CEO of Movement, one of the biggest non-bank mortgage lenders in the country, stated that, based on demand and interest rates, the company was executing “significant adjustments.”
“As a result of the recent decline in mortgage volumes, Movement Mortgage will be eliminating positions that are no longer needed,” said a Movement Mortgage spokeswoman. “This decision was not made lightly, but is necessary as we remain committed to operating a fiscally responsible company that aligns with market conditions.”
There may be some hope.
Stacey Berk, founder & managing consultant at Expand HR Consulting, said layoffs in the industry haven’t been on her radar.
“At this point, we haven’t seen layoffs, resignations, and RIFs industry-wide, as it is a bit too early to see the trickle-down effects from the lending adjustments. The impetus may come in the mid-late summer if traditional mid and lower-income and vacation home buyers’ pullback and demand reduces sharply,” Berk said.
There is a lot that could influence layoffs, resignations and RIFs in a sector. While it generally follows industry trends, these employment actions are more about an organization’s performance.
Green commiserates with those impacted by industry layoffs that he and others have pointed to.
“While it’s simple math, it’s painful for the industry and the people who work in it and are affected by it. The long-term solution is increasing overall industry productivity through an intense review of process and the underlying technologies on which those processes depend. It’s too late to solve for this round of coming layoffs, though not too early to be avoiding them in the future,” Green said.
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