Reuters
Layoffs loom as mortgage boom wanes
Friday July 25, 1:15 pm ET
By Philip Klein and Aleksandrs Rozens
NEW YORK, July 25 (Reuters) - With the boom in mortgage refinancings expected to lose steam as interest rates rise, the home loan industry, which expanded at a staggering pace over the last three years, is now bracing for layoffs.
Interest rates remain near historic lows and refinancing activity should reach a new record this year. But with 30-year mortgage loan rates now up nearly a percentage point from recent lows, the tide is turning.
Loan applications, particularly refinancings, have ebbed in recent weeks. While total lending in the mortgage industry is expected to hit an all-time record of $3.4 trillion this year, it could fall to $1.5 trillion in 2004.
The hectic and profitable pace of business in mortgage banking has, in recent years, attracted many newcomers who may be out of a job in the next two years as lending dries up, cautions James B. Nutter, a Kansas City, Missouri-based mortgage banker.
In May, the mortgage banking business employed about 409,900 people -- up sharply from January, when the industry employed 387,100, and from January 2001 levels of 272,300, the Mortgage Bankers Association of America said, citing Labor Department data.
"It (layoffs) won't start happening for a while. The degree and timing depends on how far and how soon rates move," said Douglas Duncan, chief economist at the MBA.
John Westermeier, who has recruited for the industry for 13 years, knows what can happen when rates suddenly head north, as they did in 1994 after the last major refinancing rush.
"It's a pretty steep downhill slide. It can go pretty fast," said Westermeier, a managing director at mortgage career firm Contemporary Services Inc. "Folks who were asking for an astronomical amount of money are willing to take just about anything they can," he said.
At the peak of the 1993 to 1994 refinancing boom, 246,000 people were employed by mortgage banks. By March of 1995, that number dropped to 186,000.
With the experience of 1994 clearly in mind, Westermeier, like others in the recruitment field, is shifting his focus from jobs that generate and process new loans to the more routine positions of servicing loans already on the books.
Lending firms like Nutter's have specifically built up servicing arms to weather downturns in the business of underwriting home loans. "We try to have servicing so we can get through times which are not robust. When you have a servicing arm, that means you are looking at the long term," he said.
Servicing, an important source of profit in mortgage lending, involves the collection of monthly principal and interest payments from borrowers.
"You generally see that those on the operations side are the first to feel cutbacks because they are on the forefront of the refinancing market," said Graham Harwood, chief executive of recruiter Harwood & Harwood, Inc.
Joanne James, who runs financial career site Bestheadhunters.com, said one of the mortgage recruitment firms she works with is anticipating a downturn and looking to other industries, such as firms that provide security.
Leif Thomsen, owner of Walpole, Massachusetts-based brokerage Mortgage Master Inc., said the company is keeping busy closing mortgages it sold in recent months. But he said he sees an upside to a slowdown in the mortgage market.
"It would actually be welcome to see some more normality in this industry right now," Thomsen said. "It weeds out the people that shouldn't be there in the first place." |
