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

Dour News’ steady drumbeat in the mortgage industry continues to unfold over the past two weeks, punctuated by headlines announcing layoffs and closures among ranks of independent mortgage banks. Several lenders have been added to the Pink Slip torrent.

increased interest rates, federal reserve Policy tightening is the main cause of mortgage financing industry pain just now.Last week, mortgage lenders and servicers Mr Cooper The company said it has laid off about 800 staff.

About 80% of our industry volume is done by about 40% of LOS. And the bottom 20% of the volume [handled by 60% of LOs] This is the part not shown yet [the layoff] data yet.

Garth Graham, Senior Partner, Stratmor Group

Similarly, this week’s news broke news revealing the Independent Mortgage Bank (IMB) new american funding culled employee rank at 240.Then non-QM lenders followed the news Asus Capital Group It was closing its doors and laying off over 200 employees. In September alone, the IMB slashed about 8,200 jobs. internal mortgage finance Analysis of U.S. Bureau of Labor Statistics Data is displayed.

But these job losses are the tip of the iceberg expected to sink more careers in the IMB ranks before the ice melts. Garth Graham, Senior Partner and Manager of Mergers and Acquisitions Activities Stratmor GroupSo far, many of the IMB industry layoffs have involved employees working in support positions, with loan officer jobs being dumped at the end.

“All this cutting didn’t really start until around March, so we’re going into this cycle for about six months,” Graham said. He added, “There are about 440,000 to 450,000 people employed at IMB at the peak of our industry. [last year]and had only about 300,000 before rates started cutting back during covid [pandemic]”

“So we have about 150,000 excess people,” Graham said. “In that 150,000 there are so many people of origin. LOS is just starting to take its toll.”

loan officer exit chart

Graham projects laying off across the board will eventually reach 40% to 50% of the IMB industry’s total mortgage origination staff, or about one-third of the industry as a whole. According to the IMB, urban instituteThe Center for Housing Finance Policy accounts for nearly 77% of all agency-qualified mortgage originations nationwide.

“The MBA just let them out last predictionand everyone latches on to $4.4 trillion [mortgage origination] market [in 2021] Now projected to drop to a $2 trillion market [next year]Graham said. “We projected 13 million first mortgages last year to 5.5 million next year.

“From a staffing standpoint, that looks a lot more dire than the $2 trillion headline.”

Mortgage-Data Analytics Company CEO Jeff Walton Ingenius, In a recent interview, we offered this perspective on the dire situation for some in the industry.: “Let’s put it this way. uber The driver was a loan officer. ”

The data provided by Ingenius provides deeper insight into the state of the loan officer’s industry. In 2021, the total headcount of loan officers nationwide was 353,119, according to Ingenius. 234,070 LOS generated 3 or more 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 a nearly 30% increase from 2019 to 2021 in more active loan officers.

However, as of July 15 this year, about six months into an increasing cycle of rising rates, Ingenius data shows there were 276,837 licensed loan officers in the country. Of that total, 188,264 originated three or more mortgages. This represents a reduction of 45,806 loan officers compared to 2021.

That means today’s loan officer workforce has already been cut to levels approaching LO employment in 2019. Graham points out that the majority of LO personnel, 20% as of July 15th, came after the first quarter of the year, compared to 2021.

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

Brett Ludden, Managing Director, Sterling Point Advisors

Graham predicts that by the end of the year, that figure could be down 40% to 45% in LO personnel compared to 2021.

“About 80% of our industry volume is done by about 40% of LOS,” Graham added. “So the bottom 20% of the volume [handled by 60% of LOs] This is the part not shown yet [the layoff] data yet.

“There’s not that much volume at the bottom. The opposite is that the top 40% of LOS are doing 80% [of the volume] A good company is worth a lot. ”

Graham added that industry-wide IMB employment is “certainly back to pre-Covid levels with a total of 300,000 jobs.”

“It’s painful for 150,000 people. [or so people that are going to lose their jobs]He said, “But it’s… not an existential meltdown like it was in 2008.”

read employment tea leaves

Brett Ludden, Managing Director of Mergers and Acquisitions at Sterling Point Advisorthe country’s 1,000 largest IMB overall job cuts could reach 54% by mid-2023 Project 272,000 IMB jobs will be cut by mid-2023, resulting in a total industry total of 229,000 became a person

Ludden stresses that forecasts are based on modeling estimates, adding that the best measure of job losses in the IMB industry will come from the lenders themselves.

“Up to 20% of lenders account for 80% of loan volume and employment,” he added. “Thus, unless there is substantial consolidation at the top, we should be able to measure job losses by monitoring layoffs across the maximum 200. [IMB] A company that is doing well. ”

A recent report by Fitch Rating Mortgage origination declines in 2022 continue to exceed rating agency expectations, which say lenders’ revenues are declining from “low origination volumes that outweigh cost savings.”

“Layoffs, channel exits and asset sales are accelerating, even for better-capitalized players,” says Fitch Report. “city, JP Morgan When wells fargo Meanwhile, we are reducing staff and operations Santander exited the U.S. mortgage market in February, rocket [Mortgage] Issue mortgages for customers.

“Smaller players such as real estate tech startups reali When sprout mortgage Have with shutterin the meantime First Guarantee Mortgage Company submitted for Chapter 11 Bankruptcy. [In addition,] loan depot We have closed the wholesale channel, plans to sell a $1 billion pipeline and focus on the consumer/retail channel. ”

Optimistic and well-prepared businesses are starting to see opportunities to pick up key staff and prepare for a refinancing boom when rates finally drop.

Andrew Rhodes, Senior Director, Head of Transactions, Mortgage Capital Transactions

Stratmor Group principal David Hrobon wrote in a recent commentary that by the end of the year, the mortgage advisory firm expects about 50 IMB merger or acquisition deals to be “announced or closed.” I’m here. 2018, the next best year for lender consolidation in the last 30 years. ”

“Also, according to the Bureau of Labor Statistics, our industry employed 427,000 people in March of this year,” Hrobon added. “Given the [dour] Loan volume projections…the number of companies and employees in the industry will no doubt look very different next year. ”

Rudden projects it up to 30% Of the 1,000 largest IMBs, they will disappear via sale, merger or failure by the end of 2023.

“You are the originator of mortgages and have many entities that are witnessing a significant decline in mortgage volumes and the scary [loan] Pricing,” writes John Toohig, head of trading across loans. Raymond Jamesin his weekly online newsletter, “let’s talk about loanswas published in LinkedIn“Originals skyrocketed at super-low rates, people were hired quickly, mortgage bankers made a lot of money, they made a few IPOs, the market got crowded, and then the Fed took the punchbowl.” rice field [by unleashing higher interest rates]”

How bad does it get?

Tom Piercy, Managing Director Incenter Mortgage AdvisorsIn general, he said the outlook for the housing industry was “poor for the foreseeable future.”

“But he could be very good for companies that fit their balance sheet: low debt ratios, strong cash or liquid assets, and cost-effective retail origination. Piercy said those lenders will see an expanded opportunity.

“The mortgage market will consolidate, but it’s out of recent years of record profits and boom [in 2020 and 2021]Andrew Rhodes Sr., Director, Trading Officer said Mortgage capital transaction“Optimistic and well-prepared businesses are starting to see opportunities to pick up key staff and prepare for a refinancing boom when interest rates finally drop.”

When does that turn start? Stratmor’s Graham said based on Mortgage Bankers AssociationRecent forecasts call for a “recession and lower interest rates in the second half of next year.”

“first time [the Federal Reserve] Lower rates, that’s the start of change,” added Walton of Ingenius. He said it was likely a lag between the housing industry rebound and the Federal Reserve to keep interest rates down.

“But if rates spike, you’ll see rebounds much faster as they go up,” Walton added. Until then, he said, productive loan officers are “those who are part of the 40% who run 80% of the business,” and they add more referral leads and borrowers to their roster. Said it would stay in the trench.

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

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