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“Last night, my Uber driver was a loan officer.”

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Followed by a pink slip. rise in interest rates triggered by federal reserve Policy tightening is the main cause of mortgage lending industry pain just now.Last week, mortgage lenders and servicers Mr Cooper announced that it would lay off about 800 employees.

About 80% of our industry volume is done by about 40% of LOs. And bottom 20% by volume [handled by 60% of LOs] This is the part that hasn’t appeared yet [the layoff] data yet.

Garth Graham, Senior Partner, Stratmor Group

Similarly, this week the Independent Mortgage Bank (IMB) new america fundraising Cut 240 headcount — followed by news of non-QM lender Asas Capital Group closed its doors and laid off more than 200 employees. In September alone, the IMB cut about 8,200 jobs. Inside Mortgage Finance Analysis of U.S. Bureau of Labor Statistics the data shows.

But these unemployments are just the tip of the iceberg, with more career losses expected in the IMB ranks before the ice melts.Garth Graham, senior partner and manager of M&A activity. stratmore groupMany layoffs in the IMB industry to date have involved employees working in support positions, with the loan officer job being abandoned at the end.

“All this logging didn’t really start until around March, so the cycle took six months or so,” says Graham. “At the peak of our industry, about 440,000 to 450,000 people were employed by the IMB,” he added. [last year]and there were only about 300,000 before rates started dropping during COVID [pandemic]”

“So we have about 150,000 people left,” says Graham. “There are so many originating people in that 150,000 that LO is just starting to get affected.”

Loan officer exit charting

Overall layoffs will ultimately affect 40% to 50% of the IMB industry’s overall mortgage initiation staff, and about one-third of jobs across the industry, Graham predicts. The IMB is a non-deposit lending institution, urban instituteThe Center for Housing Finance Policy accounts for nearly 77% of all agency-qualified mortgage originations nationwide.

“The MBA is just their previous forecastand everyone sticks to $4.4 trillion. [mortgage origination] market [in 2021] The market is now projected to shrink to $2 trillion [next year]said Graham. “I stuck with his 13 million first mortgage that he did last year. Next year he’s projected to have 5.5 million.

“From a staffing standpoint, this sounds far more dire than the $2 trillion headline.”

Jeff Walton, CEO of Mortgage Data Analytics Company genius, A recent interview provided this perspective on how dire things are for some in the industry.: “Let me put it this way. uber The driver was a loan officer. ”

The data provided by InGenius provides deeper insight into the industry landscape for loan officers. According to InGenius, in 2021 the total number of loan officers nationwide will be 353,119, with 234,070 of his LOs making three or more of his loans.

This is up from 263,494 LOs in 2019, with 180,713 in that group originating three or more loans that year. This represents his nearly 30% increase in more active loan officers between 2019 and 2021 (the refinancing boom).

But as of July 15 of this year, about six months into the rate hike cycle, there are 276,837 licensed loan officers in the country, according to data from InGenius. Of that total, 188,264 he originated three or more mortgage loans. This represents a decline of 45,806 loan officers compared to 2021, with him down nearly 20% over the period among his LOs who are more active.

So today’s loan officer workforce has already been reduced to levels approaching LO employment in 2019. However, Graham said most of his 20% decline in LO headcount as of July 15 compared to 2021 has occurred since the first quarter of this year. pointing out.

The top 20% of lenders account for 80% of loans and jobs. So unless there is substantial consolidation at the top, you should be able to measure job losses by monitoring the top 200 layoffs. [IMB] A company that is doing well.

Brett Luden, Managing Director of Sterling Point Advisors, said:

Graham projects that figure could reach 40% to 45% of the overall reduction in LO headcount by the end of the year compared to 2021.

“About 80% of our industry volume is done by about 40% of LOs,” added Graham. “And the bottom 20% of volume [handled by 60% of LOs] This is the part that hasn’t appeared yet [the layoff] data yet.

“There is not much bottom volume. The opposite is that the top 40% of LOs are doing 80%. [of the volume] Valuable for good companies. ”

Graham added that across the industry, IMB employment is “certainly back to pre-coronavirus levels of 300,000 jobs.”

“It’s painful for 150,000 people [or so people that are going to lose their jobs]’ he said.

read job hunting tea leaves

Brett Ludden, Managing Director, M&A Sterling Point Advisorforecasts that the overall employment decline among the country’s largest 1,000 IMBs could reach 54% by mid-2023. , resulting in an industry-wide workforce of 229,000.

Ludden stresses that the forecast is based on modeling estimates, adding that the best measure of job losses in the IMB industry will be revealed by the lenders themselves.

“The largest 20% of lenders account for 80% of lending and employment,” he added. “Thus, unless there is substantial consolidation at the top, we should be able to measure job loss by monitoring up to 200 layoffs. [IMB] This is going well. ”

A recent report by Fitch Rating says the decline in mortgage originations in 2022 continues to outpace ratings agency expectations, leading to lower earnings for lenders due to “low origination volumes that outweigh cost savings.”

Fitch’s report notes that “layoffs, channel exits and asset sales are accelerating, even among well-capitalized players.” “city, JP Morgan When wells fargo While reducing staff and operations, Santander withdrew from the U.S. mortgage market in February, rocket [Mortgage] Issue mortgages for customers.

“Smaller players such as real estate tech startups Reali When bean sprout mortgage Have shutterin the meantime First Guarantee Mortgage Corporation applied Chapter 11 Bankruptcy. [In addition,] loan depot We have closed the wholesale channel, has plans to sell its $1 billion pipeline and refocus on the consumer/retail channel. ”

Optimistic and well-prepared businesses are beginning to see opportunities to recruit key staff and prepare for a refinancing boom should interest rates eventually drop.

Andrew Rhodes, Senior Director and Head of Trading, Mortgage Capital Trading

Stratmor Group principal David Hrobon wrote in a recent commentary that the mortgage advisory firm expects about 50 IMB merger or acquisition deals to be “announced or terminated” by the end of the year. increase. 2018 was the second-highest year for lender consolidation in the last 30 years. ”

“And according to the Bureau of Labor Statistics, our industry employed 427,000 people in March this year,” Hrobon added. “Given the [dour] Projected Loan Amount… The number of companies and employees in this industry will certainly be very different from this time next year. ”

Luden’s project up to 30% Of the 1,000 largest IMBs, they are expected to disappear through sale, merger or bankruptcy by the end of 2023.

“There are a lot of entities that are mortgage originators and we are in a scary situation with a huge drop in mortgage volume. [loan] Head of Whole Loan Trading, John Tuhig, writes: Raymond Jamesin his weekly online newsletter, “let’s talk about loansPosted in LinkedIn“Originations skyrocketed with ultra-low interest rates, people were hired quickly, mortgage bankers made tons of money, did a few IPOs, markets were crowded, and the Fed picked up the punchbowl. [by unleashing higher interest rates]”

how bad will it get?

Tom Piercy, Managing Director Inncentre Mortgage Advisorsaid that, in general, the outlook for the housing industry was “poor for the foreseeable future.”

“But it could be very good for companies that are well positioned on their balance sheets – companies with low debt ratios, lots of cash or liquid assets, and cost-effective retail origination. No,” he added. Piercy said these lenders will see opportunities grow.

“The mortgage market is about to consolidate, but it’s out of recent record profits and boom [in 2020 and 2021]said Andrew Rose, Sr., Director and Head of Trading. Mortgage Capital Trading“Optimistic and well-prepared businesses are beginning to see opportunities to recruit key staff and prepare for a refinancing boom should interest rates eventually drop.”

When does that turn-in rate start? Stratmor’s Mr. Graham said, Mortgage Bankers Association‘s latest forecast sees an “economic recession and lower interest rates in the second half of next year.”

“first time [the Federal Reserve] That’s the beginning of change,” added Ingenius’ Walton. There is likely to be a time lag between the recovery in the housing industry and the Fed’s start to cut interest rates, he said.

“But if rates fall as sharply as they did, the rebound will be much faster,” Walton added. Until then, productive loan officers who are “part of his 40% running his 80% of the business” will stay in the trenches, adding more referral leads and borrowers to their roster. .

“I was a loan officer when I started in business,” Walton added.

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