The Mortgage Industry’s Nosedive: Climbing Rates and a Halt in Refinancing

The Mortgage Industry’s Nosedive: Climbing Rates and a Halt in Refinancing

Headlines all across the country continue to proclaim the current slump in the mortgage sector, with thousands of loan professionals being furloughed.

Industry titans JP Morgan Chase, Loan Depot, and USAA Federal Savings Bank are planning to cut thousands of jobs. However, published reports show that layoffs at Wells Fargo (USAA Federal Savings Bank), USAA Federal Savings Bank, First Guaranty Mortgage Corp, and others have reached the hundreds. Better.com is a New York City-based digital lender that has laid off more than half its employees.

How will this collapse in the mortgage industry impact potential homebuyers as well as other mortgage banks? Linda McCoy (president of the National Association of Mortgage Bankers) told The Epoch Times the industry would survive, and that those looking to purchase a house will no longer have to look for loans.

” The industry couldn’t cope with the volume of work that we experienced over the last two years. We had to employ lots of people as a consequence.” she said. McCoy of Mortgage Team1, Inc., Mobile, Alabama recalls the days when everyone “just couldn’t stop working .”

.”

” We were so busy caring for huge numbers of people that when the pace of life slowed down some businesses had to fire those employees.” she stated.

Founded in 1973, the NAMB serves as the voice of the mortgage industry and includes small business owners, loan originators, account executives, and related professionals. With almost 30 years in the business, McCoy admits she has never seen anything like the buying frenzy over the past two years. She said, “It was certainly an exception.” COVID was a catalyst for the demand for housing. People longed for more space so they bought more. We still weren’t able to answer every phone call .”

even before April.

McCoy says that another reason behind the current wave of layoffs can be attributed the the fall in refinancing. Refinance firms were particularly hard hit when the mortgage rates began to rise.

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McCoy forecasts the mortgage industry, along with the real estate market, will start to return to normal by the end of this year and the beginning of 2023. McCoy believes potential homebuyers will be offered more options, less bidding battles and possibly lower prices.

” “There will be a slowdown, and all of us have to go back to basics and work hard,” she stated. “We cannot be ‘order takers anymore .”

For those who lost their job recently McCoy predicted that many administrative staff would look for other jobs, and underwriters or loan officers might consider changing careers. “Just like back in 2008 when the real estate market crashed, many loan officers and real estate professionals changed jobs,” she said.

Homes stand in a Brooklyn neighborhood with a limited supply of single-family homes for sale in New York City on March 31, 2021. (Spencer Platt/Getty Images)

‘Ready for Hire ‘

Motto mortgage home services, which is a local lender in Oakbrook Terrace, Chicago, remains strong. The firm, owned by husband-and-wife team Kelly Jackson and Davina Arceneaux, are part of Motto Mortgage’s nationwide network of over 150 independently-owned offices in 40 states.

With seven employees currently, Motto plans to add three additional staff members. “We started the business in July 2020 in the height of the refinance boom, but we decided to focus on purchase business, so we really aren’t affected by the recent slowdown,” Arceneaux told The Epoch Times.

In fact, Arceneaux admits that it was hard for her to hire quality candidates during the recent buying frenzy. Arceneaux’s team was unable to keep up with volume because potential candidates were busy making so many deals. She said, “Being entrepreneurs, we had the need to wear our loan officers hats to keep up with the pace.” We’re now ready to hire .”

, which is the exact opposite of a lot other lenders.

Arceneaux stated that they are now finding great people and want to make sure they have the right people available when things pick up. One of their most recently offered positions–a loan officer assistant–was filled by someone with 20 years of experience who had recently been laid off from another lender. She said, “This has been an absolute blessing for us.”

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Typically, they handle loans averaging $250,000 to $300,000, with the occasional loan of $100,000 to $200,000 and those up to $1 million. Chicago condo loans are more common than single-family homes loans. Arceneaux stated that they have increased their efforts to inform clients and professionals about the various loan options available. These include adjustable-rate mortgages (ARMs), Federal Housing Administration loans (FHA) and the ability to lower your mortgage rate by paying points–fees to lenders for a reduced rate.

” I don’t believe we will be returning to the 3 percent rate anytime soon but I think that we will see a balance out before the end of this year.

McCoy also predicts a stabilizing of rates in the high 5’s or low 6’s through the end of the year and first quarter of 2023. She acknowledged that six percent was still an excellent rate. “For those of us who have been in the mortgage business a long time, we remember when they once hit 18 percent!”

Risk for Salespeople

Ron Kirse is the Seattle District Manager for U.S. Bank Home Mortgage, which lends in all 50 states and has offices in 26 states. He told The Epoch Times that although there have been no layoffs in my staff, “the operational side of lenders and banks has seen some layoffs mainly because the refinance volumes are gone.”

Kirse’s group has been together for years, focusing mainly on purchasing. While we aren’t at immediate risk, salespeople could become more at-risk if they don’t produce .”

.

Overall, noted Kirse, the mortgage industry experienced the fastest rate increase in 22 years from just January of this year to April. He said that last year our West Coast divisions had closed loans totaling $4.5 billion. Of this amount, $2.4 Billion was refinancing. With the current higher interest rates, nobody wants to refinance .”

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.

Like many other industries, lending can be cyclical, with relatively lower mortgage interest rates in place over the past 10 years. He said that home prices had been rising at an exorbitant rate, but with mortgage rates increasing you will see prices return to normal. “We’ve also seen a 40 percent increase in ARMs.”

His top producers are still running with about 70-80 percent on home purchases, as opposed to refinancing. He said that the people who are struggling right now depend too heavily on refinance. They didn’t invest enough in the purchasing side

While new home construction may be slowing down a little, Kirse does not see this as a sign of recession. Arceneaux agrees. She said, “It’s been much talk of a recession coming. But at the end the truth is, if people keep their jobs they can still pay their mortgages. I don’t think the mortgage industry will be affected.”

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Mary T. Prenon is a journalist who focuses on real estate and businesses. She has been a writer and reporter for over 25 years with various print and broadcast media in New York.

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