07/22 17:52
U.S. Economy: Mortgage Banking a Growing Occupation (Update2)
By Liz Enochs
Dallas, July 22 (Bloomberg) -- Selling mortgage loans by phone was going to be temporary for Roseanne Runnells.
After a three-month job search following college, Runnells landed at Countrywide Credit Industries Inc. last summer making $12 an hour. Countrywide made the job permanent in May, and she expects to earn more than $40,000 this year, and $100,000 or more next year, including bonuses.
``I love it,'' Runnells, 23, said. ``I'm making more now in my base salary than my mother ever has.''
Hers was one of 55,000 positions the mortgage banking industry created since the recession began in March 2001, as the U.S. economy lost more than 1.7 million jobs. With low mortgage rates sparking a lending boom, hiring in the industry grew 18 percent in the past 15 months, faster than for any other category of employer.
Job growth has soared in the industry even as computers and other advances have made mortgage loan officers almost twice as productive as two years ago. Federal Reserve Chairman Alan Greenspan and others have said this transformation has made it easier for people to buy or refinance homes. Housing construction and consumer spending are leading the economy's recovery.
With interest rates at a generation low, hiring is likely to continue through this year, mortgage bankers said. The industry has 365,000 workers -- about the same as General Motors Corp. and less than two companies in the Standard & Poor's 500 stock index: Wal-Mart Stores Inc. and McDonald's Corp.
Construction Starts
Stock declines may also boost home demand, as consumers look for a safer investment in real estate. The volume of loans to purchase houses is expected to rise by more than $100 billion this year to a record $989 billion, the Mortgage Bankers Association of America said.
If interest rates were to decline, ``you're right on the verge of triggering another wave of refinancing,'' said Kerry Killinger, chairman and chief executive officer of Washington Mutual Inc., the largest U.S. thrift.
In June, builders broke ground on new homes at an annual pace of 1.672 million units, more than the number of houses started in 2001. Last year was the best year for builders since 1988.
A record 6.2 million new and existing U.S. homes were sold last year, and Americans are likely to buy 6.5 million more this year, according to forecasts from the National Association of Home Builders.
``Even if rates go back up, which at some point they will, I'm very bullish on the housing market,'' said Joe Anderson, managing director of the retail lending division at Countrywide Credit, the largest independent mortgage lender, based in Calabasas, California. Countrywide increased its staff by more than 50 percent over the past year, he said.
Buying a Car
``My expectations are to experience a similar pace as we move forward throughout the remainder of this year,'' Anderson said. ``This is a fantastic -- and I underscore fantastic -- time to be in the mortgage business.''
Runnells, a telephone-sales employee at Countrywide's Dallas office, said she plans to take advantage of the industry's good times. She bought a new car just a month after being hired, and said she expects to be able to pay off the $25,000 purchase by the end of the year.
She and her boyfriend plan to get married and start having children within a few years, Runnells said. ``Being able to start a family without having any debt is my goal,'' she said.
The housing boom has also contributed to job growth in related industries. Real estate companies have added 14,000 jobs since last March, while the residential construction industry brought on 56,000 new workers.
Hiring Increase
Low mortgage rates are keeping demand strong. The average rate on a 30-year mortgage fell below 6.5 percent last month from above 7 percent earlier in the year, according to the mortgage bankers' group.
``Last year, real estate and mortgage lending was one of the strongest parts of the economy,'' said John Courson, chief executive officer of Central Pacific Mortgage Co., a lender based in Folsom, California.
Central Pacific increased its workforce by about 15 percent over the past year, Courson said.
Even so, ``we hired at a lesser rate than we would have in past refinance booms,'' he said. ``Technology has let us handle more loans, more units and more work with less people.''
Automated underwriting software has shrunk the amount of time it takes to evaluate borrowers' creditworthiness to less than a minute from as much as two hours, according to Fannie Mae, which sells a proprietary version of the underwriting software to about 1,300 lenders across the country. Washington-based Fannie Mae, a government-sponsored corporation, is the No. 1 buyer of mortgages.
Productivity Gain
Loan officers used to spend an hour or more with loan applicants, collecting pay stubs and tax returns, gathering bank and investment statements, helping them fill out application forms.
Now an application takes about 15 minutes because lenders need less information than they used to and because they can type it straight into a computer, where a click of the mouse sends the data to an automated approval program.
Such technology improvements have led to a productivity surge in the industry. With 326,900 employees, mortgage bankers originated a record $2 trillion in loans last year.
That works out to $6.2 million in loans per employee, an 89 percent jump from 2000, when 312,300 workers processed about $3.3 million each in loans, according to data from the Labor Department and the Mortgage Bankers Association of America.
`Another Wave'
``We did substantially more mortgages in 2001 than we did in 1999, and we did it with two fewer underwriters,'' said Robert Couch, chief executive officer of New South Federal Savings Bank, a subsidiary of Birmingham-based New South Bancshares Inc.
More economists expect the Federal Reserve to wait until next year before raising interest rates. Half of the 22 primary bond dealers that trade directly with the Fed say rates will hold steady until next year.
``It's a really good picture for housing in the next couple of years.'' said Doug Duncan, chief economist for the Mortgage Bankers Association of America. |
