Job cuts at non-bank lenders could shorten market slowdown

The current market downturn for mortgage lenders may be shorter than previous cycles, primarily due to recent rounds of non-bank-mandated layoffs.

“While it is true that many non-banks entered this downturn with a large war chest of cash and capital, this is more than offset by the impact of warehousing and investor covenants, which force lenders to act quickly to reduce costs”, Jim Cameron, Stratmor Groupwrote in a report published this week. “In short, although this downturn is very painful, maybe we will get through it faster.”

Non-banks hold more than 60% market share of mortgage sector production – and they are more likely than banks to move quickly to reduce capacity. Based on recent data from the Mortgage Bankers Association (MBA) and Stratmor, Cameron said non-bank turnover rates for processors, underwriters and closers were generally in the 35% to 50% range in the first half of 2022, compared to 18% to 22% for banks.

According to Cameron, the recent downturn has resulted in the biggest and fastest rate hike in modern history – and the biggest drop in volume and revenue mortgage business has ever seen.

So far, the market contraction has caused mortgage companies’ total production revenue to decline 2.7% quarter-over-quarter and 18% year-over-year, to 396 basis points in the third quarter, according to a report by a group of analysts from Keefe, Bruyette & Woods, Inc..

Looking ahead, analysts say industry profitability is likely to remain challenged, with seasonal weakness in Q4 2022 and Q1 2023. Analysts say the recovery, which will take time, will depend on the rate at which the industry is willing and able to reduce capacity.

Cutting capacity

This week’s round of layoffs mostly includes non-bank lenders.

Home Point Financial Corporationthe parent company of the pure wholesale lender Attachment point, cut about 100 employees in four states on Nov. 17, according to WARN notices filed by the company.

The company sent pink slips to 49 staff in Texas, 30 in Michigan and 10 in Florida. No WARN notice has been made public in Arizona, but the company has confirmed that a document has been filed with the state employment department.

“I can confirm that we made reductions last week and filed WARN notices in four states, and it affected approximately 100 people in total,” a company spokesperson wrote in an email to Housingwire.

In Florida, where the WARN notice provides more detail, the company cut origination-related positions, such as a document coordinator and two senior loan coordinators. Finance staff, including a warehouse financier and a warehouse specialist, were also made redundant.

None of the employees are represented by a union and the layoffs involved both remote and in-person employees.

The latest layoffs come on top of the 913 Home Point employees cut in early September. In total, Home Point has reduced its workforce from around 4,000 workers in the summer of 2021 to around 1,000 in the fall of 2022.

Over the past year he has also sold large parts of the business – including sub-services with ServiceMac and correspondent delegated to Planet Home Lending – which represents several thousand workers in transition to new companies.

Based in Illinois Interim mortgagelegally known as Chicago Mortgage Solutions LLCissued pink slips to employees this month amid forecasts that home sales are set to fall even more next year than in 2022.

Although Interfirst Mortgage did not respond to requests for comment, the positions affected by the layoff included closer, processor, business analyst and loan officers, according to postings by former employees on LinkedIn.

“As the mortgage industry hasn’t been as supportive, another mortgage industry layoff took place last week,” a former employee posted on LinkedIn. “Unfortunately, I was one of those employees affected by the layoff along with some great colleagues and friends I met along the way.”

“The mortgage industry is cyclical. We all knew that when we signed up,” another former employee wrote on the social network. “I worked for the same company for 27 years and hope to be back maybe in another capacity.”

Founded in 2001 as a retail originator, Interfirst Mortgage expanded into wholesale in 2008 and added a correspondent channel in 2011. After origination volume fell nearly 86% to 2 billion in 2016 from $14.1 billion in 2012, the company decided to shut down operations in 2017. However, it was relaunched three years later with a proprietary loan origination platform that allowed Interfirst eliminate upfront costs and reduce interest rates.

The company raised $175 million last year, led by StoicLane, to finance new technologies. Since relaunching operations, Interfirst has also hired teachers and first responders as loan officers. Instead of offering commission shares to OLs, they paid a salary between $44,000 and $68,000 per year.

The company has 30 active loan officers in four branches across the country, according to Mortgage Technology Modex. A snapshot of how it works offers an explanation of Interfirst’s business difficulties. The lender has generated a total volume of $953.2 million since the start of the year, compared to $2.14 billion in 2021.

About 95% of its volume this year came from refis, and the origin of purchases accounted for less than 4%. Creations in October 2022 fell more than 95% year over year to $10.7 million.