Magazine article American Banker

Layoffs Begin as Firms Try to Stay Profitable

Magazine article American Banker

Layoffs Begin as Firms Try to Stay Profitable

Article excerpt

Mortgage companies across the country are beginning to lay off workers to bolster their bottom lines.

With the number of loan applications down about 40% over the last 12 months and smaller interest spreads because of stiff competition, the bottom line is being squeezed and staff cuts are the most direct route to relief.

Several companies, including North American Mortgage Corp. and Source One Mortgage Services Corp., have acknowledged letting some workers go, and other lenders are taking a long, cold look at staffing levels.

Interests rates are up and lenders are reporting that originations are down, a combination that has historically led to staff contraction. In the last such contraction, staff reductions ran to about 20%, but nobody is expecting such severe cutbacks this year.

"There are three stages to this cycle," said Terrance Hodel, president of North American. "First there is price cutting. Then there is a round of layoffs. And finally, prices start to drift back up."

North American has dismissed 46 of the 360 telemarketers it had employed in California and Texas. Since mortgages originated by telemarketers are mostly refinancings - 95% in the case of North American - that business has been hurt as rates have risen toward 8%, Mr. Hodel said.

Downturn in Originations

Source One Mortgage Services has experienced a downturn in originations and has released an unspecified number of part-time workers and support staff, said an executive at the Farmington Hills, Mich. …

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