Mortgage lenders have imposed new rounds of layoffs in the fourth quarter, reflecting a dreadful landscape for originators.
This week, the latest Freddie Mac weekly survey data showed that the 30-year fixed-rate mortgage increased to 7.08%, up 13 basis points compared to last week. Rates averaged 2.98% this time last year.
“As the housing market adjusts to rapidly tightening monetary policy, mortgage rates again surpassed 7%,” Sam Khater, Freddie Mac’s chief economist, said in a statement. “The housing market is the most interest-rate sensitive segment of the economy, and the impact rates have on homebuyers continues to evolve. Home sales have declined significantly and, as we approach year-end, they are not expected to improve.”
Surging mortgage rates result from the ongoing tightening of monetary policy to combat persistent inflation. In its latest move, the Federal Reserve raised the federal funds rate by another 75 basis points on November 2 – and future rate hikes are expected even with inflation slowing down.
“Over the past year, primary mortgage rates have increased by over 300 bps to 7.2% – the largest trailing 12-month increase since the 1980s,” analysts at Keefe, Bruyette & Woods (KBW) wrote in a report following the Fed’s decision last week. “This creates a challenging environment for volume-sensitive businesses such as mortgage originators and title insurers.”
In other words, mortgage lenders are adjusting their workforces for these dark days.
Freedom Mortgage, Prosperity Home Mortgages and the mortgage division of Citizens Bank issued pink slips in October and the two first weeks of November. In addition, companies such as NewRez, Better.com and Wells Fargo filed Worker Adjustment and Retraining Notifications (WARN) with authorities across different U.S. states.
Meanwhile, CrossCountry faced a case of a “fake” WARN notice filed by a former employee saying the company laid off 100 employees in Colorado. The company denied the round of layoffs in a written statement sent to HousingWire. The state’s Department of Labor and Employment said it removed the notification from the e-WARN system and is “seeking ways to make the process more fool proof.”
A massive job cut
Freedom Mortgage engaged in massive layoffs starting last week, sources told HousingWire. It affected at least 50% of the staff, positions in operations and loan officers, according to multiple former employees. Amid worsening market conditions, the lender and servicer also accelerated offshoring positions to India and the Philippines, the sources said.
The layoffs impacted both the retail and wholesale channel and their positions following a training period of overseas staff, according to multiple sources. HousingWire previously reported on Freedom Mortgage’s multiple rounds of layoffs this year as it offshores job to work mortgage files at lower costs.
Freedom, founded in 1990 by Stanley Middleman, claims on LinkedIn to have more than 10,000 employees. A total of 5,001 people have Freedom Mortgage listed as their employer, including part-time roles. Of the total employees, 428 are active loan officers, according to mortgage software company Modex.
“Every site had staff reductions from the vice president to sales managers to loan originators,” an employee in mid-level management said. “All site staff either took a pay cut, were terminated or took a different role.”
Freedom, one of the country’s largest VA and government lenders and servicers, did not respond to requests for comments including the size of the layoff, positions eliminated and whether severance payment would be provided.
Employees started seeing their positions, including underwriters and closers, transferred offshore after a trial “pilot program” leaving US employees few loans to review.
“They (overseas employees) come to us and we review them before they go to processing and underwriting,” said a former employee speaking on condition of anonymity. “They (the firm) were doing pilots with the offshore people. They would bring in people offshore and state they were making changes.”
“Starting from February red flags were raised,” another former employee said. “That’s when outsourcing impacted our day to day jobs. When you do a loan, US employees used to have to do early closing disclosures. Those jobs started to become offshore starting February.”
Freedom Mortgage’s loan origination volume fell by the second-largest pace this year among the top mortgage lenders compared to 2021. Ranked as the 18th largest mortgage originator, it originated $24.4 billion in volume as of September 2022, dropping 75% from what it did in the same period last year, according to data from Inside Mortgage Finance. Its servicing business, however, was the ninth largest in the country, totaling $464 billion, a 19% increase from the same period last year.
Relatedly, loanDepot, which reported a $138 million financial loss in the third quarter, disclosed that it had reduced its workforce by 47.5% over the past 12 months to 6,121.
Not much better
New York-based Better.com, which has made several job cuts since late 2021, eliminated more than 75 positions, according to to WARN notices filed in California and New York in early November.
Better issued pink slips to 48 employees in its Irvine and Oakland offices with the latter permanently closing down.
A total of 28 staff members not represented by a union last week in New York, due to “economic” reasons, the company told the New York State Department of Labor last Friday.
“Better is focused on making prudent decisions that account for current market dynamics,” a company spokesperson said in a statement. “The company remains committed to serving its customers in the long term and making homeownership faster, easier, and more affordable for all Americans.”
While the size of the layoff across the country is unknown, positions of affected employees from LinkedIn posts included client success specialist, senior operations associate, account manager and issue resolution specialist.
Since its infamous layoff of 900 workers via Zoom in December 2021, the company had five layoffs totaling thousands of employees within a year. In March, the digital lender cut 3,000 jobs, roughly 35% of its staff in America and India, followed by two additional layoffs in April and August.
Better.com reduced the time employees can take leave of absence in its August layoff. While the specifics were not revealed then, a recent lawsuit filed by former director Ryan Peugh offers some details. Peugh, who was let go in August, claimed the change of its leave of absence policy reduced his 12-week paternity leave to a 4-week period.
Depository cuts
Top depository mortgage lender Wells Fargo is also on the list of companies laying off in the fourth quarter. In this case, the workforce reduction comes after the bank reduced originations by 59% year-over-year in Q3 2022.
Wells Fargo informed the Maryland Department of Labor it cut 31 jobs on Friday. In addition, the bank notified Iowa state authorities of its plans to lay off 14 employees.
In Iowa, the workforce reduction came from its Des Moines and West Des Moines offices, according to a WARN notice filed in the Iowa Workforce Development. The employment termination date is scheduled for December 22 and January 3. The Des Moines metropolitan area is the headquarters for the bank’s home mortgage division.
According to one source with knowledge of the jobs cut decision, the positions on the Maryland and Iowa WARN notices included home lending roles and some other businesses.
“We regularly review and adjust staffing levels to align with market conditions and the needs of our businesses,” a spokesperson for the company wrote to HousingWire. “The changes we’ve recently made are the result of the broader rate environment and consistent with the response of other lenders in the industry.”
Wells Fargo recently announced changes in the leadership of its mortgage division. Kristy Fercho, head of Wells Fargo home lending, was named the bank’s new head of diverse segments, representation and inclusion (DSRI).
Fercho is succeeding Kleber Santos, who became CEO of Wells Fargo’s consumer lending business in July 2022. She will remain head of home lending while the company searches for her successor.
Marginal reductions
New Rez, a residential mortgage subsidiary for Rithm Capital, informed the Maryland Department of Labor on Friday that it cut 24 jobs last week. They mentioned the layoffs are unrelated to the Covid-19 pandemic but did not provide further details. HousingWire sent requests for comments, but the company’s spokespersons have not responded.
New Rez’s latest round of layoffs seems small compared to the overall workforce reduction at Rithm Capital. Rithm’s CEO Michael Nierenberg said last week in a call with analysts that the group cut 7,500 jobs since August 2021 among its brands, such as New Rez and Caliber.
“At the time of the closing of Caliber in 2021, there were 13,500 employees in the system. Today, unfortunately, due to the current market environment, that number is down to about 6,000 people,” Nierenberg said.
Smaller business
Prosperity Home Mortgage, a Long and Foster’s company, also had a round of layoffs at the beginning of October, affecting a group of processors and underwriters, two former employees told HousingWire. Long & Foster Companies is a subsidiary of HomeServices of America, a Berkshire Hathaway affiliate.
A spokesperson for the company said Prosperity continually evaluates the market conditions and related business needs to adjust operations as the economy shifts.
“With today’s higher-rate environment, our company, like many others in the industry, was forced to make the difficult decision to reduce its number of employees,” the spokesperson told HousingWire.
According to the tech mortgage platform Modex, Prosperity originated $11.2 billion in the last 12 months. The company has licenses in 49 states, 387 branches and 491 active loan officers.
Franklin American Mortgage Company, founded in 1994 in Brentwood, Tennessee, and a division of Citizens Bank since 2018, also had a round of layoffs, according to former employees.
A spokesperson for the company said the layoffs impacted fewer than 25 employees, but did not provide further details.
Dark days ahead
Against the backdrop of rising interest rates and a shrinking mortgage origination market, the loan officer workforce has already been pared down close to pre-pandemic levels.
In 2021, the total loan-officer headcount nationwide was 353,119, up from 263,494 LOs in 2019, according to mortgage-data analytics company InGenius. As of July 15 this year, InGenius’ data shows there were 276,837 licensed loan officers in the country.
Don’t expect the labor market for mortgage pros to improve anytime soon.
Garth Graham, managing director of Stratmor Group, told HousingWire that industrywide, employment at nonbanks “is certainly getting back to the pre-COVID levels at 300,000 total jobs.”
“It’s painful for the 150,000 [or so people that are going to lose their jobs],” he said, “but it’s … not an existential meltdown like we had in 2008.”
