Prudential Home Mortgage has bad news for nearly 600 employees. Countrywide Funding has the same unfortunate news for about 500 members of its loan production staff, and North American Mortgage is handing out pink slips to between 400 and 500 employees.
It's the same story for lenders across the country who've seen the salad days of the refi boom vanish before their eyes.
One of the biggest layoff hits comes from Pasadena, Calif.-based Countrywide, which reported May 4 that due to production declines, it was reducing its production staff by 18%--which means just fewer than 500 jobs, according to a Countrywide spokeswoman.
Countrywide saw its origination volume drop to $3 billion in April, 23% lower than the $3.9 billion it produced in April 1993. It also said it planned to maintain a head count in line with its production activity. The jobs cuts included layoffs, retirements and resignations, and represent a 1 0% reduction in overall staffing. Employment there at the end of last month was 4,784.
"We're doing the same thing," said Terrance G. Hodel, president of North American Mortgage. The Santa Rose, Calif.-based lender, which had more than $2.1 billion in application volume in April 1993, had seen production drop to $1.1 billion in April 1994.
"About 75% of our costs are for people," Hodel said, "The rest of our costs are insignificant--we can only really save money through reductions in staff."
Hodel said North American had record purchase volumes in January and February, but volume dropped so significantly in March that Realtors were actually calling loan officers and asking what happened March 20-the day interest rates rose above 8%.
Similar declines in production have spurred the cutbacks now rippling through the mortgage lending industry. The Mortgage Bankers Association said it expects an overall 10% to 15% employee fallout through mid-1995. Before rates started their climb, the industry retained roughly 200,000 active employees. "It won't be a modest fallout," said David Lereah, MBA chief economist. "There will be between 20,000 and 30,000 jobs lost.
"Most companies learned from the 1987 [refi] fallout, and they've used more temps and brokers, and have established more correspondent relationships," Lereah said. "The problem here is this refi boom was so much bigger than in 1987 that companies tended to overemphasize the refi business. Now that that business has gone away, those companies are getting hurt."
"We're closing our processing facility in Bangor, Maine," said Charles Conway, a spokesman for Fleet Real Estate Funding, Charleston, S.C. Conway said Fleet plans to consolidate that facility with one in East Providence, R.I., taking about 100 jobs.
"We've been through this cycle before, and we didn't add a lot of bricks and mortar [branches] this time," Conway said. One lesson Fleet learned from the end of the 1987 refinance boom was that more reliance on correspondent lenders would help keep production up without the closing of branches when rates began climbing again. "We began [the refi boom] with between 90 and 95 branches, and we ended A with 91," Conway said.
"Volume is down about 50% from last year's levels," said Edgar R. Wood, president of Corinthian Mortgage, of Overland Park, Kan. He predicted the drop in production volume would mean a cut of about 14%--or about 20 loan processors.
"We've had some inevitable cutbacks," Wood said. "We knew a slowdown was going to come, so we used temps and contract labor. We've spent the last two years at--or exceeding--our capacity. Now we're operating at realistic levels."
The cutback trend has also hit mortgage brokers. The National Association of Mortgage Brokers said brokers would still have work, but many are being forced to reduce their staffs.
Mary Burt, NAMB chief of government relations, said that the trade group, which represents more than 22,000 brokers, expects the worst fall off in the next three to six months. She added, however, that brokers that had planned well, would survive.
One such broker could be Michigan Mortgage Lenders Corp., an Oakland County, Mich. broker, who hasn't seen a downturn in production yet.
"We've had our best two months ever," said Suzanne Taube, the company's president. Some might put an asterisk next to the company's production level, however, because a new law effectively slashing property taxes in Michigan by as much as 50% has helped sustain production.
But Taube said the company--which is still hiring loan officers--has also seen rampant signs of employee layoffs.
"Last year, when production was running at record levels, I couldn't find a trained loan processor," she said. "Now they're responding in droves--we're getting eight to 10 calls a day. And everyone I've talked to has been laid off."
