Refinancings Unlikely to Lift Mortgage Payrolls

Bank payrolls were hit hard during the downturn, but layoffs at depositories were mild compared with the rest of the financial services industry.

Reductions in the ranks of mortgage bankers and mortgage brokers accounted for much of the carnage. Although the worst cuts appear long past, employment in the mortgage industry continued to grind down in recent months, and the current revival in loan volume appears likely to produce a modest reversal in the trend at most, if last year's refinancing wavelet is a guide.

Employment at depositories fell 3.5% from the middle of 2007, to a seasonally adjusted 1.8 million in August, according to data from the Labor Department. Meanwhile, total private-sector employment fell 5.5%, to 131 million, and payrolls at nonbank lenders fell 26%, to 800,000 (see charts).

The rhythms of employment in the mortgage industry have long tracked with grand fluctuations in loan volume. Most recently, payrolls at mortgage banks and mortgage brokerages reached a plateau at a combined work force of about 500,000 in 2005, then began to fall sharply in 2007. (Employment data for the mortgage industry is not seasonally adjusted.)

The vast majority of the bloodletting took place before the recession officially ended in the middle of 2009, and mortgage industry payrolls stabilized at around 260,000 through the end of last year, showing little reaction to a bounce in loan volume that took hold during the second half.

By July, as mortgage applications activity began to regain some momentum because of falling interest rates, mortgage payrolls had dropped to less than 240,000.

David Olson, the president of Access Mortgage Research and Consulting Inc., said that, despite the current pickup in loan volume, the overall outlook for employment in the mortgage industry is poor.

He cited forecasts that the rebound in refinancings will be fleeting, and pullbacks by major lenders that are likely to crimp independent producers.

Terry Wakefield, another consultant, argued that, in fact, the industry should strive to cut payrolls further and automate in an effort to avoid expensive cycles of hiring and training. "The fundamental problem is archaic infrastructure," he said.

Scott Stern, the chief executive of the mortgage banking cooperative Lenders One, said that after having to make painful cuts, employers are being cautious.

"This refinance boom isn't based on a good economy, it's not based on a strong purchase market that's waiting in the wings. It's simply an interest rate phenomenon," he said. "Nobody wants to hire just to fire six months later."