An Adjustment of Their Own
Monday, August 21, 2006
Nathan Burch remembers the mortgage lending boom of recent years fondly.
"It was easy," said Burch, chief operating officer of NorthPoint Mortgage in Reston. "You just told people you were in the mortgage business and your phone rang off the hook."
It's not as easy anymore, because slowing home sales have led to a dramatic drop in mortgage lending. For instance, Countrywide Financial Corp., one of the nation's largest lenders, recently reported that its mortgage loan funding fell 19 percent last month compared with July 2005.
Still, that has not translated to widespread layoffs among loan officers locally. Instead, industry insiders here expect slow and gradual attrition.
"It's become more of a normal market, rather than the haywire, crazy market of the last few years," said Charles Dipino Jr., a vice president with Universal Trust Mortgage Corp. in Columbia.
Many people who jumped into the business during the boom, some of whom now close just one or two loans a month, are realizing things have changed. They have not made the decision to give up yet, though. And few are being hurried out the door, because they work on commission. That means businesses do not face the same pressure to cut costs by letting people go as they would with salaried employees.
Many lenders "don't really have an incentive to get rid of 100 percent commissioned salespeople because they don't need to do that much to cover their costs," said Robert Hanson, operations manager for Mortgage Bancorp in Kensington. "If he nets even $15,000 for the company, it's not hurting anything."
The most valuable employees now, though, are those who have been in business a long time and bring in repeat traffic.
"The veterans with more experience and more efficiency are better able to weather the storm," Dipino said.
Some firms are even hiring. Burch said his loan volume is down a third from the $20 million a month his firm saw a year ago. However, the company is still profitable, so he recently brought on a recruiter to woo good loan originators from faltering competitors.
"If you can find a person who's producing in a place where everybody's glum, he's not going to be happy there," Burch said. "So I say to him, 'It's time for a change.' "
In June 2003, rates on 30-year loans hit 5.21 percent, the lowest in more than 40 years, and mortgage lending shot through the ceiling. But now, 30-year, fixed-rate mortgages are hovering around 6.5 percent. In the week ended July 28, mortgage loan applications fell to their lowest level since May 2002, according to a weekly survey of lenders conducted by the Mortgage Bankers Association, a trade group. Lending has picked up a bit in the weeks since then, but just a bit.
The employment data still show the effect of the housing boom. In the second quarter of 2000, before the boom, about 494,000 people worked as loan counselors and officers or loan interviewers and clerks, according to government statistics. When interest rates were at their low point, in the second quarter of 2003, employment surged to 589,000. Even with the drop in loan volume, in this year's second quarter there were some 677,000 people in the business.
Each closing is harder fought now, bankers say.
"Every transaction has been very, very challenging," said Steven Calem, a mortgage banker and mortgage broker with American Bank in Bethesda. "There are no straightforward transactions. There are a lot of wheels on every transaction."
He said clients today often confront complex situations, such as needing to close a purchase of a new house even though their old house has not sold yet.
But rising rates are actually sending some people to lenders.
Rachael Neenan, a loan officer with NorthPoint, said that she is keeping busy with people trading in their adjustable-rate mortgages for fixed-rate loans.
"There are still good numbers of [refinancings]," Neenan said. "People want to get out of ARMs."