As loan demand flags, the pace of layoffs is picking up in the mortgage industry.

Countrywide Credit Industries, the nation's largest mortgage banker, cut 363 loan production jobs in April, or 14.2% from its production staff, a company spokeswoman said Thursday. The sharpest cuts came at a unit that gets loans from brokers.

Smaller companies are also swinging the ax. Centerbank Mortgage Co., Waterbury, Conn., recently told 50 employees -- 7.1% of its total staff -- to clear out their desks and go home with severance pay.

Harder Times Seen Ahead

"It's a tough time," said Ross W. Walker, senior vice president, Huntington Mortgage Co., Columbus, Ohio., in a despondent voice, "and it will be tougher than we have experienced in some years."

Though many mortgage lenders have been steadily dropping temporary workers for several months, the latest round of cutbacks are affecting permanent employees.

And the cuts are getting deeper as companies face up to the realities of higher interest rates and dwindling loan volume.

The Mortgage Bankers Association of America is predicting that industrywide originations will fall to about $770 billion this year from a record $1 trillion in 1993. Some executives are privately predicting the final tally may be closer to $650 billion.

In an unusually aggressive move, the home loan unit of Prudential Insurance Co. of America is planning to lay off nearly 600 people, or 12% of its staff, in one swoop. The cutbacks, as reported last week, are to affect most areas of the company -- and employees at virtually all ranks.

Huntington Mortgage, a unit of Huntington Bancshares, has seen a decline of 14% in its sales force in recent weeks, Mr. Walker said.

In another step to cut costs, the company recently sold its Chicago branch to Inland Mortgage Corp.

"When you have people who were on top of the mountain and the mountain collapses below the level of the valley, what do you think that does to morale?" he said.

He estimated that lower volume will drive the industry to cut "a minimum" of 20% of all jobs this year.

He said many lenders cannot grasp how distressed the industry is today -- especially when in 1992 and 1993 business was so amazing. "We developed a stupor," he said.

Although many lenders, including Centerbank president Thomas C. Brown, hired temporary workers during the heights of the refinance boom last year, most of those workers have been let go, experts said.

Allen Gutterman, president of Response Professional Placement, a New York employee-search company, estimates the industry has cut 10,000 temporary staffers since interest rates shot up earlier this year.

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