According to Bloomberg News, US home mortgage creditors have been hiring for most of the last two years. Now, these very lenders are spending time laying off the workers.
The actual picture
The number of people working as mortgage brokers and different kinds of loans, which is a proxy for the home lending employment in all, has escalated more than 50%, recording at approximately 130,000 since late 2019, as per the US Bureau of Labor Statistics. This is the highest since the beginning of 2006, just before the financial crunch.
Mortgage rates were seen rising since August, attaining a mark of 3.92% last week, which is perhaps the highest since May 2019. With borrowing becoming more expensive than before, the number of refinancing applications has dropped by 45% in the last six months.
While few employers engaged in the mortgage business or allied areas like home purchase loan making can be accommodated, not all will be able to do so, and lay off cannot be avoided.
Bloomberg News reports that job cuts are likely to appear in the strong labor market as the United States recovers from the pandemic, and unemployment at 4% as of January. With the increase in wages, pressure is being exerted on Federal Reserve to foster rates sooner next month so that economic growth can be slowed down and inflation can be tamed.
As per Erica Adelberg, Bloomberg Intelligence analyst keeping a tab on mortgages, it is unlikely that creditors would go the subprime mortgage way en masse since regulations post-crisis make it challenging to earn profits.
A reversal?
The drop in mortgage jobs comes on close heels following rigorous hiring of staff in 2020 and 2021. As Federal Reserve watched to ensure that there was no economic implode during the coronavirus pandemic, there were cut interest rates to zero, and 30-year mortgage rates nosedived to 2.65% by 2021 from the early 2020s 3.5%.
A flood of loans followed, and since the financing costs were low, the sale of houses escalated, contributing to the US economic growth. Approximately 0.45% point of 5.7% growth in GDP in the previous year was due to the housing sector, as per economist at Moody’s Analytics.
Currently, there is a drop in volume. The Mortgage Bankers Association anticipates that in the current year, the volume might drop to $2.6 trillion from 2021’s $4 trillion.
Bloomberg News reports another area on which lenders might turn their focus before going on a layoff spree. It is related to borrowers that cannot document income and therefore are not eligible to qualify for a mortgage-backed by a government sponsor enterprise like Fannie Mae. For such borrowers, the home loans, in particular, are known as “non-qualified mortgages” that are likely to become famous.
