California-based LoanDepot, one of the top mortgage lenders in Massachusetts last year, had already cut nearly 3,000 jobs in 2022 when it announced plans this month to further reduce staff.
It’s not alone. Dozens of other companies involved in the mortgage industry have joined LoanDepot in laying off thousands of employees this year after rapidly rising interest rates and changing economic conditions helped bring the refinance boom to an end. And the coming months could see more job losses as lenders adjust to a new environment.
But as economic conditions continue to reshape the industry in the coming months, some Massachusetts lenders could end up keeping all or most of their staff, including those that relied on existing staff to manage volumes during the pandemic.
“We didn’t staff up for the refinance boom,” said Brian Koss, executive vice president at Danvers-based Mortgage Network Inc. “It was a challenge, but we also knew from 30-plus years in the business that it will be winter again soon.”
Business Down 42 Percent
Residential mortgage activity dropped by 42 percent in Massachusetts in the first six months of 2022, with mortgage refinances down by 50 percent compared to the same period in 2021, according to The Warren Group, publisher of Banker & Tradesman.
LoanDepot was one of the top lenders in Massachusetts last year, ranking sixth for total number of residential loans processed and fourth for refinances. Like other lenders, it saw its mortgage activity in Massachusetts drop during the first six months of the year, including a 69 percent drop in refinances compared to the same period last year.
The mortgage company released a plan in July it is calling “Vision 2025” to address market conditions and position the company for the long-term, the company said in a statement. The plan calls for a staff reduction from 11,300 at the end of 2021 to 6,500 by the end of this year. About 2,800 of the 4,800 employees who will lose jobs have already been laid off.
Other lenders that have cut staff this year include JPMorgan Chase, Wells Fargo, Movement Mortgage and Nationstar Mortgage, also known as Mr. Cooper.
Some companies around the country have even ceased operations. Texas-based First Guaranty Mortgage Corp. said in a statement at the end of June that it had filed for Chapter 11 bankruptcy protection as it explored restructuring options. The mortgage company, which had processed 120 loans this year for Massachusetts borrowers, notified the state of Texas that 428 employees were laid off in June.
States receive notifications about certain mass layoffs that are covered by the Worker Adjustment and Retraining Notification Act, such as a layoff involving at least 50 employees who make up one-third or more of the staff at a single site. So far this year, no WARN notices involving mortgage lenders have been filed in Massachusetts as of publication time, according to a weekly report produced by the MassHire Department of Career Services’ Rapid Response Team.
More Normalized Market Arrives
Like other companies, Fairway Independent Mortgage added staff during 2020 and 2021 to meet homeowner demand for refinances, said David Lazowski, Fairway’s president of retail sales for the East region. The Wisconsin-based lender issued the third-largest number of residential purchase loans in Massachusetts last year and the seventh-largest number of refinances.
The industry had not seen such demand in 40 years, he said.
“We had to serve our customers in ‘20 and ‘21 and do things on the staffing side that we would not normally do,” Lazowski said. “I think that we’re coming off of a unique time in the space where everyone in banking and mortgage banking just did not have the capacity.”
To meet the demand, Lazowski said, lenders took steps such as hiring more staff than would typically be needed for certain roles, bringing on less experienced employees and paying higher wages. With 2022 turning out to be a more normalized market, similar to 2018 and 2019, he said, Fairway is making staffing adjustments to meet the current market.
Lazowski did not say how many jobs have been cut this year at Fairway, which he said has more than 8,000 employees. He noted that the number was relatively small when compared to other staffing reductions the industry has recently seen, including at LoanDepot, and none required a WARN filing. Fairway is employee-owned, he added, and while the company still must operate responsibly, it can make decisions without having to consider shareholder pressures.
“It’s about consciously and responsibly bringing down capacity in ways that we deem appropriate,” Lazowski said. “It’s nice to know that we don’t have the same pressure and that we can really do this in a way that saves as many jobs as possible.”
Lenders Ride Market’s ‘Ebbs and Flows’
Some lenders have not needed to reduce staff this year.
Salem Five Mortgage Co., a division of the mutual bank Salem Five, brought on temporary employees in 2020 and 2021, but otherwise kept normal staffing levels, said Ed McDonald, president of Salem Five Mortgage.
Salem Five has many long-time operational staff, McDonald said, and the company relied on overtime and technology enhancements to manage the last two years’ loan volumes. He added that employees say they appreciate that swings in volumes will not affect their jobs, while also recognizing the need to be ready for the next time volumes increase.
“When it’s really, really busy, productivity levels are extremely high, and they’re not as high now,” McDonald said. “But we try to maintain high levels of customer service in these ebbs and flows of volume.”
Mortgage Network, a privately held company, used overtime and employee incentives to manage volumes over the past two years, said Koss, the company’s national head of production. He added that long-time staff members preferred taking on extra work rather than having the company add employees and then go through a round of layoffs.
Koss said the company has removed some job postings and adjusted hiring salaries for operational staff. Mortgage Network executives will continue to watch the effects of rising interest rates and changes in the economy, Koss said, adding that if the company does eventually reduce staff, layoffs would be limited to 2 percent to 3 percent of employees.
Yet even as thousands of mortgage workers have lost jobs nationwide and economic volatility makes many more fear for their jobs, some local companies continue to hire. Salem Five is looking to add loan officers, McDonald said, and Lazowski said Fairway is adding to its sales team.
“One of the ways you can help keep jobs is by increasing sales,” Lazowski said. “In a strange way, there’s no pressure – there’s opportunity.”