Mortgage Lenders Are Cutting Jobs Amid Rising Rates
By QUEENA SOOK KIM
Staff Reporter of THE WALL STREET JOURNAL
The cooling refinancing boom is claiming its first casualties: employees of the nation's big mortgage lenders.
Countrywide Financial Corp., the nation's largest independent mortgage lender, said it has shed 500 jobs since July, while online lender E*Trade Mortgage last week let go 163 telephone-service representatives.
While in both cases the cuts represent less than 5% of these companies' work forces, industry executives and analysts expect more severe job cuts to come. Rising interest rates already have slowed the refinancing boom that has sustained the industry, raising the prospect that mortgage providers will lose more than 150,000 employees from their payroll over the next six months, according to David Olson, managing director of Wholesale Access Mortgage Research & Consulting Inc. The Columbia, Md., firm works with the nation's 20 biggest mortgage lenders.
"The industry has been living off refis," Mr. Olson said. "And rising employment in the industry has been a direct function of that. With refis down greatly, we're expecting a major reduction in workers."
Indeed, Countrywide said daily applications for both purchase and refinancing fell by 29% in August to $1.8 billion, compared with $2.53 billion in July. Refinancing activity for Countrywide in August fell 26% to $28.40 billion from $38.49 billion in July. Industrywide, refinancing has fallen by 78% since May, according to a late-August Mortgage Bankers Association of America report.
The decline in refinancing activity is expected to deliver a double whammy to the still-fragile economy. Refinancing has helped consumer spending by putting more money in homeowners' pockets. At the same time, it also has created more than 175,000 jobs since 2000.
According to a survey of 44,000 brokerage firms conducted by Wholesale Access Mortgage in 2002, nearly 450,000 people were employed in the industry. That figure represents a 64% increase compared with 2000 employment figures. In 2000, the industry was in the midst of a down cycle as rates climbed above 8%.
Certainly, the mortgage industry has always been a cyclical business, its fate closely tied with the fluctuating interest rate. But the most recent boom was unusual because the long period of falling interest rates contributed to a prolonged period of hiring.
For now, mortgage brokers, who have made hefty commissions in recent years, are remaining relatively unscathed. And lenders are cutting mostly clerical and sales-support employees.
E*Trade Mortgage, of Huntington Beach, Calif., said the employees it laid off were mainly temporary workers brought in to help with the surge in refinancing applications in June, when rates hit a 40-year low. Countrywide, Calabasas, Calif., said many of the laid-off employees worked in the loan-processing unit or helped provide closing services like appraisals and title searches.
A spokesman for another online lender, Ditech.com, of Costa Mesa, Calif., said, "Because of the change in the market condition, we're assessing our staffing resources." |
