Job cuts by non-bank lenders could shorten the market downturn

The current market downturn for mortgage lenders may be shorter than in previous cycles, mainly due to recent rounds of workforce layoffs imposed by non-banks.

“While it is true that many non-banks have entered this recession with a large coffer of cash and capital, this is more than offset by the impact of stock and investor clauses, which are forcing lenders to move quickly to cut costs”, Jim Cameron, Stramor Group‘s senior partner, wrote in a report released this week. “In short, although this recession is very painful, perhaps we will overcome it faster.”

Non-banks have a market share of more than 60% of the mortgage industry’s output and 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 closes were typically between 35% and 50% in the first half of 2022, compared to 18% and 22% for banks. banks.

According to Cameron, the recent recession has produced the largest and most rapid rise in rates in modern history and the sharpest drop in volume and revenue the mortgage business has ever seen.

So far, the contracting market has caused mortgage companies’ total manufacturing income to fall 2.7 percent quarter-over-quarter and 18 percent year-over-year, to 396 basis points in the third quarter, according to a report from a group of analysts of Keefe, Bruyette & Woods, Inc.

Looking ahead, analysts say profitability in the sector is likely to remain struggling, with seasonal weakness in Q4 2022 and Q1 2023. The recovery, which will take time, will depend on how pace the industry is, according to analysts. industry is willing and able to reduce capacity.

cutting ability

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

Home Point Financial Companythe parent company of the pure wholesale lender home point, it 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 members in Texas, 30 in Michigan and 10 in Florida. There is no warning notice 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 some reductions last week and filed WARN notices in four states, and it impacted about 100 people total,” a company spokesperson wrote in an email to Housingwire.

In Florida, where the advisory notice provides more detail, the firm has cut origination-related jobs such as a documents coordinator and two senior loan coordinators. Financing staff members, including a warehouse financer and a warehouse specialist, were also laid off.

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

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

In the past year, it has also divested a large chunk of the business, including sub-assisting with Service Mac and correspondent delegate a Planet House Loan – which represents several thousand workers moving to new businesses.

Based in Illinois Interfirst mortgagelegally known as Chicago LLC Mortgage Solutionsissued pink slips to employees this month amid predictions that housing sales are expected to slump even more next year than in 2022.

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

“Because the mortgage industry hasn’t been as supportive, there was another mortgage industry layoff last week,” said a former employee 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 business is cyclical… We all knew it when we signed up,” another former employee wrote on the social media network. “I have been working for the same company for 27 years and I hope to come back again maybe in a different guise.”

Founded in 2001 as a retail originator, Interfirst Mortgage expanded into wholesale in 2008 and added a matching channel in 2011. After origination volume plummeted nearly 86% to $2 billion in 2016 from $14.1 billion in 2012, the company decided to go out of business in 2017 However, three years later it relaunched with a proprietary loan-issuance platform that allowed Interfirst to eliminate upfront fees and cut interest rates interest.

It was last year that the company raised $175 million, led by stoiclan, to finance new technologies. Since the relaunch of operations, Interfirst has also employed teachers and first responders as loan agents. Instead of offering split commissions to LOs, they paid a salary between $44,000 and $68,000 a year.

The company has 30 active loan officers with four branches across the country, according to Mortgage Technology Modex. A snapshot of its operation offers an explanation of Intefirst’s struggling business. The lender originated a total volume of $953.2 million year-to-date, down from $2.14 billion in 2021.

About 95% of its volume this year came from refis and source purchases accounted for less than 4%. Origins in October 2022 plunged more than 95% year over year to $10.7 million.

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