Citigroup, the fifth-biggest U.S. mortgage originator last year, shut an office in Illinois and is eliminating jobs as rising mortgage rates cut off loan refinancings and volumes slow.
The bank recently closed its Danville facility due to "decreased refinance volumes," Mark Rodgers, a bank spokesman, said in an e-mailed statement. The lender also cut some telephone sales agents, he said. Rodgers declined to comment on the number of employees affected, which Fox Business Network reported earlier today was 2,200.
Citigroup joins mortgage lenders including Wells Fargo and Bank of America in cutting jobs tied to home lending as Federal Reserve discussions about paring back bond purchases pushes mortgage rates higher. Banks are trimming staff as a surge in borrowing costs slowed refinancing by more than 70 percent and curbed what had been record profits.
Mortgage applications in the U.S. plunged last week to the lowest level in almost five years, according to the Washington- based Mortgage Bankers Association. The average rate on a 30- year fixed loan climbed to 4.8 percent, matching the highest level since April 2011.
Citigroup announced the closing of the Danville site on July 15, about 18 months after it opened, Rodgers said in a separate e-mail. The decision affected about 120 employees, who got severance and transition support, he said.
"The Danville facility was originally established to handle the surge in demand for refinancing," Rodgers said. "However, due to the ongoing decline in refinance volumes, the excess capacity Danville provided is no longer needed."
Lenders have hailed their ability to hire and fire mortgage staff quickly as one way to handle the cycles of the business. Wells Fargo Chief Financial Officer Tim Sloan said this week it would take about one to two quarters for the lender to adapt to the slowdown in volumes,
Bank of America is eliminating 2,100 jobs and closing 16 offices by Oct. 31, two people with direct knowledge of the plan said earlier this week. Wells Fargo last month said it will cut 2,300 jobs in mortgage production because demand for refinancings has slumped.
Citigroup Chief Executive Officer Michael Corbat, who took over less than a year ago, announced plans in December to cut more than 11,000 jobs and scale back operations in some emerging markets. The bank employed about 253,000 people at the end of June, down from 259,000 at the end of December, according to the company's website.
Rodgers declined to comment on whether the mortgage cuts were part of the earlier announcement.
"Although the housing market is gaining strength, the lower volume of mortgage refinancing will impact our consumer business," Corbat, 53, said July 15. "We're already taking steps to make sure the mortgage business is sized correctly."
The bank made $65 billion mortgages last year, or about 3.4 percent of the total market, according to Inside Mortgage Finance, a trade publication.