In what can only be described as cruel irony, the number of jobs in the mortgage industry continue to disappear as rates hit all time lows. Traditionally, all time lows in mortgage rates have resulted in a refinance boom, increased hiring by mortgage companies and hefty paychecks for mortgage loan originators.
This time, things are different. The Bureau of Labor Statistics reports that in June, mortgage companies eliminated 2,500 full time positions in the mortgage banker/broker sector. Over the past five years, hundreds of thousands of loan originators, processors, clerical staff, and underwriters have seen their jobs in the mortgage industry disappear, probably permanently. In Connecticut, for example, the number of mortgage loan originators working for non bank institutions (mortgage brokers or mortgages bankers) has declined by 80% over the past four years. In a discussion with Debra Killian, a Board of Directors member of the Connecticut Association of Mortgage Brokers, I was informed that the number of non bank mortgage originators has declined from 24,000 to approximately 4,500.
It could be argued that the mortgage industry sowed the seeds of its own destruction by supplying mortgages loans to a vast number of unqualified borrowers who are now defaulting in record numbers. Defaulting borrowers are not refinance candidates.
As detailed in Soaring Mortgage Defaults, there is little reason to believe that the mortgage industry will recover anytime soon. A significant number of homeowners simply cannot refinance due to foreclosure, negative equity, insufficient income or poor credit caused by delinquent mortgage payments. The ugly statistics imply a long recovery for housing with many homeowners locked out of the mortgage market.
- The delinquency rate for all mortgages on one to four residential units was 10%
- 4.6% of all homes are in the process of foreclosure
- More than one out of every eight or 15% of all American homes with a mortgage are either in default or in the foreclosure process
- In May, 94,000 homeowners lost their homes to foreclosure, for an annualized rate of 1.1 million homes
- The percentage of home mortgages that are 90 days or more past due or in the process of foreclosure is 9.5%
- Almost 25% of homeowners owe mortgage debt exceeding the value of the home
- Banks and mortgage investors are now sitting on an estimated inventory of 550,000 homes that have been repossessed through foreclosure and need to be sold into a weak market
In addition, many qualified borrowers have previously refinanced at low rates and do not wish to incur the considerable costs of another refinance unless mortgage rates decline dramatically from current levels. New home purchases and construction are at all time lows as potential buyers consider the downside risks of home ownership. Consumers are avoiding additional debt as incomes decline in a poor economy. Despite the considerable depreciation in the value of housing, many potential buyers simply cannot afford the price of a home. If interest rates increase going forward, the number of refinances will plunge, causing further job losses in the mortgage industry.
Anyone looking for a quick rebound in mortgage industry employment is certain to be in for a long wait.