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How will lender layoffs affect my mortgage?

 

Mortgage banks, like many other companies, experience fluctuating levels of business and must respond with an ebb and flow of employees. In the aftermath of the housing bubble, new employees were hired to handle the rush of loan modification and refinance applications. Now that refinance activity has slowed and fewer homeowners are delinquent on their loans, lenders are again reducing their mortgage staff.

Chase, Wells Fargo and BofA

Layoffs have been concentrated among employees who were hired to handle refinance applications and delinquent borrowers, says Sam Garcia, founder and publisher of Mortgage Daily in Dallas. Both refinancing and loan modifications have settled down and are likely to continue falling through at least the middle of next year, he says.

"To keep things in perspective, we don't expect mortgage job losses to be anywhere near the more than 88,000 we tracked in 2007 at the height of the mortgage meltdown," says Garcia.

In February 2013, JP Morgan Chase announced that by the end of 2014 they would eliminate 13,000 to 15,000 positions in their mortgage division. In the beginning of 2013, Chase laid off primarily mortgage servicers, but later began laying off originators as well.

"We're responding to our customers' changing needs with these layoffs," says Amy Bonitatibus, a spokesperson for JP Morgan Chase in New York City. "Fewer homeowners are struggling to pay their loans and many people have already refinanced to take advantage of a stronger economy and lower mortgage rates."

Wells Fargo Home Mortgage is eliminating positions in response to reduced refinancing volume, according to Alfredo Padilla, a spokesperson for Wells Fargo Home Mortgage in Los Angeles.

"We're continuing to manage our existing loan volume and we're also responding to market changes by aligning our staff with the needs of our business and our customers," says Padilla.

“We continue to reduce the size of our mortgage servicing operations in line with the successful reduction of our portfolio of delinquent mortgage customers,” Terry H. Francisco, senior vice president of corporate communications for Bank of America in Calabasas, Calif., said in an email.

According to the Wall Street Journal, some lenders will add employees to handle new regulatory requirements but they're not likely to hire additional staff such as underwriters, loan processors or loan closers through at least the first three months of 2014.

Layoffs by the numbers

According to Mortgage Daily, during the second quarter of 2013 (most recent available statistics), 9,950 layoffs were announced, on top of 2,930 mortgage layoffs in the first quarter. Third and fourth quarter layoffs are anticipated to be higher, according to Garcia.

While the numbers vary some from source to source, here's a breakdown of some of the layoffs:

  • Bank of America: 2,100
  • JP Morgan Chase: 11,000 this year; 13,000 to 15,000 total by the end of 2014
  • Wells Fargo: 6,200
  • SunTrust Mortgage: 800
  • Citibank: 1,120
  • Mortgage Investors Corp. (the 7th largest originator of VA loans): 500

TD Bank bucks the trend

While most lenders are shedding employees, some are ramping up their mortgage staff. TD Bank, a regional bank that operates on the East Coast from Maine to Florida, plans to hire 140 mortgage loan officers as soon as possible.

"We're enthusiastic about continuing to grow our mortgage business," says Malcolm Hollensteiner,director of retail lending sales at TD Bank in Vienna, Va. "We think market conditions are favorable for expansion, especially in our East Coast footprint. We've been focused on buyers for the past two years so we think we're well-positioned to grow year by year in that market."

Hollensteiner says he thinks the regulatory changes that go into effect in January 2014 will make the playing field of mortgage lenders smaller at the same time that the housing market is recovering, particularly in the Philadelphia to Boston corridor where TD is expanding.

Consumer impact of shrinking pool of mortgage professionals

Garcia says the layoffs in the mortgage industry could be good for consumers because, even with a smaller staff, lenders will need new borrowers to keep their business going.

"Fewer loan originations mean that lenders will have to do more to earn business than last year," says Garcia.

"If anything, lenders will be more attuned to consumer needs and demands and will place more emphasis on customer service," Hollensteiner says. "But from a credit perspective, especially with new rules being put in place, it would be surprising to see credit guidelines eased. Borrowers will still have to qualify for loans."

About the author:

Michele LernerMichele Lerner, author of "HOMEBUYING: Tough Times, First Time, Any Time", has been writing about personal finance and real estate for more than two decades for a variety of publications and websites including The Washington Post, The Motley Fool, Investopedia, Insurance.com, HSH.com, SavingsAccount.com, National Real Estate Investor magazine, The Washington Times, Urban Land magazine, NAREIT's REIT magazine and numerous Realtor associations.

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