Record-setting mortgage demand is forcing companies to reach deeper into the labor market-and deeper into their pockets to retain experienced loan specialists.

As the refinancing boom continues, mortgage bankers say new technology and reliance on temporary employees may help them avoid the overstaffing problems they had when the last boom ended in 1994.

But they also say that the surge in loan applications, as consumers take advantage of lower rates, is putting them in a serious bind, at least temporarily.

"Technical positions like tax processor have been nearly impossible to fill, and all of us are so desperate now for employees that we're just looking for someone who's breathing and (has) a modicum of intelligence," said Debra Ruh, training and productivity specialist at Crestar Mortgage of Richmond, Va.

The competition for talent has resulted in bidding wars among lenders and, in one case, litigation over one company's alleged raid on another's staff. Consolidation in banking is making matters worse.

"People will jump ship for $2,000 more," Ms. Ruh said. "As banks gobble each other up, employees get sick of it, are no longer loyal, and move to different industries-we're in competition with restaurants and shopping malls for talent."

The litigation between City Mortgage Corp. and Northrim Bank of Anchorage, Alaska, is an extreme example of the competition. In a suit filed last month in an Alaskan state court, City Mortgage accused Northrim of financing a raid on its staff by Residential Mortgage, a new company in which Northrim has a stake.

City Mortgage is alleging that Northrim contributed $1 million to help Residential Mortgage attract 70% of City Mortgage's staff. It also alleges that Roger Aldrich, president of Residential Mortgage, who was once president of City Mortgage, used "proprietary information, private disclosures, and confidential information" to attract talent.

Northrim and City Mortgage declined to comment, and Mr. Aldrich could not be reached. But other Alaskan mortgage executives said the staffing crunch is particularly acute in their state.

"The boom in the industry particularly challenges us to find qualified staff, and it's rare we get someone with experience to apply," said Judy Kemplen, vice president in charge of statewide mortgage loans for National Bank of Alaska, headquartered in Anchorage. "There's a higher premium on employees, period."

Nancy Usera, senior vice president for corporate relations at Alaska USA Federal Credit Union in Anchorage, said not all lenders in the lower 48 states underwrite mortgages in Alaska.

"It's a basic supply and demand situation. There is simply more of a demand and an opportunity for them (employees) to move around and be recruited and improve their personal fortunes," Ms. Usera said.

But the demand for mortgage talent is hardly confined to Alaska. Mortgage employment has grown nationwide, to 296,400 people as of September, from 252,500 in September 1997, according to data kept by the Mortgage Bankers Association.

"I would imagine employment would reach a high point in the fourth quarter of '98," said Brian Carey, an economist at the association. In 1993, he said, mortgage employment averaged 225,000. "We'll average just under 300,000 people by yearend this year."

The competition for talent seems to be affecting jobs top to bottom, with retention of employees requiring increases in salaries and benefits. Ms. Ruh at Crestar said even high school students are fair game for entry- level jobs.

Even when the economy slows there will be high levels of refinancing, and competition for talent will remain strong, said A. William Schenck, chairman and chief executive officer of Fleet Mortgage of Columbia, S.C.

"More than 50% of our top management people are new to the company over the last 15 months, and we've replaced more than 100 of our loan officers over the past year," Mr. Schenck said. "However, basic employment won't be nearly as severely impacted as after the '93 refi boom because of a substantial use throughout the industry of temporary employees and overtime."

Some said the hiring crunch developed because labor-saving technology wasn't all it was cracked up to be, but they said firings could come after installation of better systems.

"This temporary phenomenon is caused by the high volume of origination, and systems haven't come on-line as fast as people thought they would," said Edward E. Furash of Furash & Co., a Washington consultantcy. He said that even though employees are in high demand lenders could "cut them out" when cheaper, more efficient systems come along.

The general feeling among industry officials is that the boom will last through mid-1999 but that prospects for 2000 remain cloudy.

Cross-selling opportunities may further reduce the number of people needed in the industry. One-stop shopping in banks of the new millennium may include optional insurance and long-distance service.

"The amount of revenue you can get off existing customers is enormous," Ms. Ruh said. "Why go to Allstate Insurance if you're already at Crestar Insurance?"

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