Home lenders making layoffs

Many jobs already cut, with more expected to go

The mortgage business cycle

Staffing tends to tighten with rising interest rates

December 28, 2003|By Karen Robinson-Jacobs | Karen Robinson-Jacobs,LOS ANGELES TIMES

With much of the steam out of the refinancing market, the mortgage financing industry is bracing for widespread layoffs.

Two of the biggest home-loan providers - Washington Mutual Inc. and Countrywide Financial Corp. - have cut more than 6,500 jobs in recent months. And lenders are preparing to cut thousands more jobs during the coming months. In all, about 65,000 people employed at companies specializing in mortgage lending will probably lose their jobs during the next 12 months, says the national Mortgage Bankers Association.

That represents about 15 percent of the peak employment in late summer, when 435,000 workers were processing home loans as borrowers scurried for fear of missing out on historically low mortgage rates. The association's estimate doesn't include jobs at banks that don't have separate mortgage subsidiaries, and there was no breakdown of the data by states.

Mortgage interest rates hit the lowest level in nearly 45 years in June and they have bounced up and down ever since. While the rates still are historically low, most economists expect the rates to inch up next year.

The change in employment is an expected part of the mortgage business cycle, experts said. A large percentage of workers have joined the mortgage lending business during the past two years and they're not expected to be in the same roles this time next year, said Bob Kaestner, a vice president with Bank of America and spokesman for the Maryland Mortgage Bankers Association.

This month, Seattle-based Washington Mutual, the nation's second-largest mortgage lender, said more than 2,000 home-loan staff members - mostly temporary and contract positions - would be cut, in addition to the 4,500 workers let go since August. A spokesman said the company was not breaking out the figures to show in what states the jobs would be lost.

Washington Mutual said it expected its mortgage volume in the fourth quarter to fall by 50 percent from the third quarter, and Chief Executive Officer Kerry Killinger reduced earnings estimates.

Calabasas, Calif.-based Countrywide Financial also has been slimming down as refinancings have faded. The company has cut about 2,200 jobs - in loan originations and closing services - since mortgage employment peaked in July at more than 22,000 workers.

In Maryland, CitiMortgage Inc., the mortgage lending unit of Citigroup, said it plans to lay off 180 people when it consolidates a Frederick office in February with another one. Anita Gupta, vice president for the global consumer group of CitiMortgage, said the layoffs will include managers, supervisors, clerks and customer representatives.

San Francisco-based Wells Fargo & Co., the nation's largest mortgage lender, declined to comment about its employment plans. "At any given time, we may be reducing staffing levels in one area, but adding in another," the bank said in a statement.

According to the Mortgage Bankers Association, total mortgage originations are expected to hit a record $3.4 trillion this year, up 35 percent from a year ago. Refinanced mortgages account for about 60 percent of that total, or more than $2 trillion.

The association predicts that the mortgage loan volume will fall by half next year, to $1.6 trillion, with refinancings making up only 28 percent of the total.

"We've never seen a refi boom as dramatic as the one that's coming to a close now," said Charlotte Chamberlain, an analyst with Jeffries & Co. who tracks Countrywide and E-Trade Financial Corp., among other companies.

As was the case with E-Trade, which in August gave pink slips to 163 employees, most of the downsized workers in the industry have been temporary or contract hires. Even if specialty mortgage firms eliminate 15 percent of their staff as projected, employment overall will still be about 370,000 - 50 percent more than their payrolls during the 1993-1994 refinancing boom, according to the Mortgage Bankers Association.

Some business owners said they chose not to hire workers during the past two years, knowing that the cycle would turn. For companies such as AMC Mortgage Corp. in Fallston, employees worked overtime during the height of the refinancing boom last year to address the increased demand.

When you "take people on when things are really good, then you have to let them go when things go down and we haven't wanted to do that," said mortgage broker John Councilman, who also is AMC's owner and a past board member for the Maryland Association of Mortgage Brokers.

A Sun staff writer contributed to this article. The Los Angeles Times is a Tribune Publishing newspaper.

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