JPMorgan Chase & Co. and Movement Mortgage this month were the latest companies to announce layoffs of hundreds of mortgage workers due to a downturn in business. Many more people in the industry can expect to lose their jobs in the coming months, Fannie Mae says.
“I do believe you will see more layoffs,” Fannie’s chief economist, Doug Duncan, said during a telephone interview. Hiring in the mortgage business has traditionally been boom and bust. Companies add staff during refinance booms and then lay off workers when the rates tick up. Given the cost to hire and fire people, the companies tend to wait and see if the downturn is permanent, Duncan said. There is usually a six-month lag before the layoffs pick up steam.
That time has arrived, Duncan said.
“We are at the beginning of that I would say,” he said. “It is a cyclical business and it is driven by the cyclical behavior of interest rates. So, none of that should be a surprise to anyone. The only thing different in this cycle was that it was policy that drove rates, so they were so low for so long.”
Last week, more bleeding was on display. Fort Mill, South Carolina-based Movement Mortgage announced it was cutting a total of 180 jobs from four locations around the country. Various jobs were cut in Fort Mill; Norfolk and Richmond, Virginia; and Tempe, Arizona.
In October, JPMorgan Chase & Co. announced 400 job cuts mostly on the servicing side. Wells Fargo indicated in August that it was eliminating roughly 640 mortgage-related jobs due to the slowdown in business. San Antonio-based USAA said in September that it was cutting 265 jobs later this year from offices in San Antonio, Phoenix, and Tampa, Florida.
Movement Mortgage, once among the nation’s fastest growing mortgage companies, has announced three rounds of layoffs since February. The company also let go 100 employees in June and cut 75 jobs in February. The latest round comes “in response to a nationwide downturn in the housing and mortgage market,” its press release said. The company also said the move was made in response to lower volume forecasts for 2019 due to higher interest rates, tight for-sale inventories, rising home prices and lower consumer demand for mortgages.
Movement Chief Executive Officer Casey Crawford addressed employees in a speech that was videotaped and distributed to the media.
“I don’t like the fact we are in a tough, declining housing market,” Crawford said. “I don’t like the fact that we had to say goodbye to 200 people that we love.”
Crawford, a former NFL football player, said the cuts were made so the company didn’t have to play “prevent defense,” adding that the layoffs would allow the company to go “on offense.”
“We made offensive moves today because of the market we are in,” he said. “It is a tough market. We want to go out and play offense in that market.”
Lower volumes are a reality facing most companies. Refinancing volume this year is projected to be down 24 percent from the 2017 level, which also was down significantly from the previous two years, according to the Mortgage Bankers Association (MBA).
Average nonbank profit margins in the second quarter were stronger due to companies’ cost-cutting moves.
In the April-June period, the average nonbank profit per mortgage loan rose to $580, up from a reported loss of $118 per loan in the first quarter of 2018. That second-quarter profit margin, though, was still extremely weak, MBA data suggests. In response to the industry’s struggles, companies have been aggressively cutting costs, according to MBA.
Fannie Mae’s most recent sentiment survey of mortgage executives suggests that lenders are looking to make more personnel cuts going forward.
“Cost cutting had moved from ninth on their list of activities to improve their competitive position to third on the list,” Duncan said. “This suggests they are moving toward the layoff part of the cycle.”
Scotsman Guide – October 2018
Published on 2018-10-12 10:34:09
