Brian Driscoll
‘Deep relationships’ key

The subprime and Alternative-A mortgage crisis has resulted in as many as 40,000 job losses nationally in the past year, and in Massachusetts industry sources estimate upwards of 4,000 lending-related positions have disappeared as companies close or downsize.

Many recent reports estimate job cuts may have been as high as 25,000 in August alone.

Not all sectors of the loan industry are suffering. Representatives of the local banking community say their institutions continue to issue conforming loans at a good clip, and some non-bank lenders and brokers in the Bay State say the crisis hasn’t affected them substantially, either.

In fact, representatives from at least 25 companies are expected to be on hand to recruit new staff, mostly salespeople, at the upcoming New England Mortgage Banking Conference in Providence, R.I. The event’s chief organizer, the Massachusetts Mortgage Bankers Association, announced last week that it will add a job fair to the annual tradeshow’s offerings following a spate of industry job cuts announced nationally in August.

Recruiter response to the conference’s first employment-focused program has been higher than expected, noted Kevin Cuff, executive director of MMBA.

“I would love to start a company with some of the people on the street today,” Cuff said.

He said that the mortgage job market “probably was oversaturated with employees” at its high point, when both home-purchase and refinance lending activity were being driven by low interest rates and a booming real estate market.

The conference, which will take place Sept. 19-21, also will offer a variety of support programs designed to help some former loan originators make the transition to jobs in other fields.

Brian Koss, a 20-plus-year industry veteran who now is managing partner at Mortgage Network in Danvers, estimates that by the time the hemorrhaging of jobs stops, between 30 percent and 50 percent of those employed in the mortgage field at the peak period in 2005 will have left or been forced out.

“[The industry] was 30 percent over capacity at its peak,” he said.

Koss said that today, Mortgage Network is “getting letters from lenders every day saying, basically, ‘Will originate [loans] for food.'”

“We’re being honest with people. We’re telling them you should look at other industries. Some of these jobs won’t be back,” he said. Despite the grim statistics, Koss said his 19-year-old company has never laid anyone off, in fact has hired 80 new staffers – mostly loan originators – this year. Mortgage Network new employs a total of 200 people scattered throughout Massachusetts, New Hampshire, Maine, Florida and South Carolina.

Although the total number of state-licensed mortgage broker and lender offices is up, some 200 decided not to renew their Massachusetts licenses in May this year. Nevertheless, there were 1,458 brokerage and lending firms licensed to do business in Massachusetts in May 2006 and 1,501 after the renewal period in May 2007. The total number of licenses has since climbed to 1,711 in August.

Koss said that the 200 or so firms that opted not to renews probably represents an exodus of about 1,000, since most were smaller companies that likely employed an average of five people.

Larger lenders with subprime and Alt-A divisions in Massachusetts also laid off at least at least a few hundred Bay State workers when they shut down or downsized this year.

Ameriquest, for example, laid off 90 employees here in May, out of 3,800 nationwide, according to a Service Employees International Union letter reprinted in several news outlets at the time. Countrywide Financial Corp.’s subprime division, Full Spectrum, also shut down in 2007, shedding 75 Massachusetts jobs in the process.

Washington Mutual Bank’s subprime division, Long Beach Mortgage, closed four of eight regional offices and laid off 180 employees nationwide earlier this year, according to a March Los Angeles Times report; the New England regional office in Hingham remains open, but has lost 16 of 24 staffer since then, an employee said.

Other large lenders or wholesalers with subprime or Alt-A divisions and at least some Bay State employees, including American Home Mortgage, First Magnus, National City and Fremont General Corp., have let go a total of at least 27,000 employees this year. According to one local lender, however, First Magnus and National City each had fewer than 25 Massachusetts employees.

Some subprime mortgage originators also worked for several divisions of their companies, Koss pointed out, and stayed with the company even when one division was shut down. But their loan volumes and incomes have gone down, sometimes as much as 75 percent.

Mortgage-related loss of work extends to other industries, as well, noted Massachusetts Real Estate Bar Association President Sami Baghdady, including appraisers, real estate agents and paralegals.

The employment slowdown actually started about a year and a half ago, Baghdady said, when interest rates crept up and homeowners started refinancing less.

“When we had the refi boom many law firms hired more help. After it slowed down, you had some layoffs in the field,” he said. Recent events have deepened the cutbacks, he said.

Experience Counts

But Baghdady and Massachusetts REBA Executive Director Peter Wittenborg said few lawyers practice exclusively in one area, such as real estate closings, and thus relatively few have actually cut jobs.

Those attorneys who do real estate-related work often can shift to related specialties, such as helping banks or borrowers with foreclosures, Baghdady said.

“I personally am doing more commercial real estate work, which hasn’t been so affected by the residential [problems],” he said.

At least one lender who will be accepting resumes at the NEMBC job fair focuses exclusively on commercial loans.

“We’re in a different realm than most of the companies struggling or no longer with us,” a spokeswoman for Miami-based Silver Hill Financial said. “We don’t do any residential.”

The four-year-old company has 400 employees in several states, including Massachusetts.

Keith Wilcox, vice president of 1st American Home Loans in Danielson, Conn., 10 minutes from the Massachusetts border, said the office will be seeking to hire at least five new mortgage originators at the NEMBC job fair. The Warren Group, Banker & Tradesman’s parent company, produces the conference program guide.

“We have the staff and technology to hire, and most importantly the programs,” Wilcox said. Many government-sponsored mortgage assistance programs offered through agencies like the Federal Housing Administration, U.S. Department of Veterans Affairs and Rural Housing Service require a little more paperwork and time to close, and thus haven’t been popular during the recent “instant gratification” subprime roller-coaster, Wilcox said. Now, they’re becoming the primary way to serve lower-income borrowers in need and Wilcox said 1st American Home Loans is originating far more of them.

He said the company is seeking loan originators who “have [existing customer] relationships and want to have a lot more money.” Wilcox said he’s confident 1st American, which is licensed in both Connecticut and Massachusetts, will survive the current market difficulties.

“The bottom line is, I survived in 1991 when interest rates were 18.5 percent, and I will survive now.”

Dallas-based First Horizon Home Loans, which shut down its subprime division, First Connect, earlier this year, also will be recruiting at the fair.

Regional President Glenn Tobin said First Horizon, the Bay State’s 15th largest residential lender, made between 8 percent and 10 percent of its loans through First Connect. Between five and 10 First Horizon employees lost their jobs this year out of 225 total in New England.

Those who were let go were across all company divisions but “didn’t have the experience, the history and, ultimately, the sales record” the company required for continued employment, said corporate regional recruiter Lisa Arthur.

First Horizon now is looking to hire “top producers” who have experience and industry relationships, Tobin said.

“It’s now back to old-school” lending practices, Tobin said. “People who have been doing this for a long time, who know how to evaluate a tax return, an income and an appraisal” bring the most value to the table as loan originators.

“We feel compelled to host a booth [at the NEMBC job fair],” he said, “because we feel that this type market generates a flight to quality.”

Some who might be looking at the job fair include sales staff laid off from the Hingham regional office of Washington Mutual’s Long Beach Mortgage (since renamed WAMU Wholesale Specialty Lending).

Of the 16 employees who have left since February, most have been re-hired by other companies but laid off again, said a woman who answered the phone there last week.

“One guy is on his third layoff,” she said. Most have five or six years’ experience and are in their mid-50s, she said.

Koss said in this market, five or six years’ experience may not be enough to attract the interest of a new employer.

“Ten years is experience these days,” he said.

“People who have those deep relationships and a loyal clientele who are going to follow them; that’s who we’re looking for,” added Brian Driscoll, manager of Amerihome Mortgage’s Winchester office.

The “very low barrier” that was in place for anyone who wanted an originator job in recent years, he said, is gone.