A Reversal
The likely decline in mortgage jobs comes after lenders spent much of 2020 and 2021 staffing up. As the Federal Reserve looked to help ensure the economy didn’t implode during the pandemic, it cut interest rates back to zero and 30-year mortgage rates dropped to as low as 2.65% by early 2021 from above 3.5% in early 2020.
A flood of loans followed, and with lower financing costs, housing sales jumped, contributing to overall U.S. economic growth. About 0.45 percentage point of the 5.7% growth in gross domestic product last year was because of the housing sector, said Cristian deRitis, economist at Moody’s Analytics.
Now volume is dropping. The Mortgage Bankers Association expects volume this year to go down to $2.6 trillion from $4 trillion in 2021.
One area that mortgage employees can focus on more now is mortgages for home purchases, which can take longer to process than refinancings. For a purchase, the underwriter needs to evaluate new appraisal documentation, and look at down payments and other moving costs.
“Although we expect refinancing volume to fall as interest rates rise, purchase volumes remain elevated,” noted Moody’s Analytics’ deRitis. “Purchases are more labor-intensive, which could offset some decline in personnel.”
Mortgage wholesalers, lenders that work with brokers and third parties and tend to focus on purchase loans, may be in particularly good shape now, said Alex Elezaj, chief strategy officer for United Wholesale Mortgage, one of the biggest wholesalers in the U.S. United Wholesale Mortgage does not expect layoffs in its business, he said.
“Between now and the midyear, there’s going to be continued pressure on a lot of mortgage companies as rates continue to rise,” Elezaj said.
Falling Sales?
And even if purchase volume is strong now, it might fall in the coming months: in addition to mortgage rates having risen in recent months, housing prices have jumped over the last two years, making homes less affordable.
Another area that lenders might focus on more before laying off staffers are borrowers that can’t document income and therefore don’t qualify for mortgages backed by government-sponsored enterprises like Fannie Mae. The home loans for these borrowers, in particular the ones known as “non-qualified mortgages,” might become a bit more popular.
“With refi volume down, lenders will have to work on something else. We think they could focus on non-QM, which take longer to underwrite,” said Sujoy Saha, RMBS analyst for the structured finance team at S&P Global Ratings.
This article was provided by Bloomberg News.