Christina Bennett loved the mortgage industry, but after undergoing multiple layoffs, she says the feeling wasn’t mutual.
Bennett spent years in and out of mortgage roles in various underwriting posts, rising to the management ranks in her last company, Caliber Home Loans, where she spent nearly eight years.
Although she had been through layoffs before, nothing prepared Bennett for what she faced in April 2022 when she and dozens of other employees were herded into a group Zoom call and unceremoniously laid off en masse. Moments later, her computer access was cut off and that was that.
“The way companies have treated their employees has been horrific, it’s been inhumane,” says Bennett, who lives in Conifer, Colorado. That experience was the final straw to convince Bennett to walk away from the industry for good.
She’s not alone either.
Mortgage companies big and small have laid off tens of thousands of people since 2022. With more people working remotely since the coronavirus pandemic, news of these cuts are increasingly delivered over Zoom or video conferencing, adding a layer of stony-faced detachment to the proceedings.
The data tells a sobering story. According to Ingenius, a mortgage analytics and consulting firm, the total number of mortgage loan officers (MLOs) who closed at least one loan in the previous 12 months peaked at 178,270 in June 2021. By January 2024, though, that figure plummeted 47% to just 93,938 MLOs.
That’s nearly half of the producing loan officers in the United States who are no longer in business. Plus, those numbers don’t count the thousands more operational roles—loan processors, underwriters, compliance analysts and others—that have disappeared, too.
Data from the Nationwide Multistate Licensing System (NMLS) mirrors a similar exodus, with active, state-licensed MLOs who originated at least one loan within a quarter peaking at 124,804 in the fourth quarter of 2021. But by the end of 2023, that figure plummeted by 36% to just 80,230 MLOs, NMLS reported.
For instance, data on LO attrition from larger banks may be more muted than that at independent mortgage banks, or IMBs. That’s because larger institutions try to transfer mortgage employees into other bank divisions. Smaller IMBs don’t have that option, though, says Marina Walsh, vice president of industry analysis with the Mortgage Bankers Association (MBA).
That’s why IMBs have seen a 44% drop in sales and non-sales roles combined, she adds.
“It’s a sign of the times in terms of what’s happened with volume; it’s a very different market now than in 2020 and 2021,” Walsh says.
Valerie Saunders, president of the National Association of Mortgage Brokers (NAMB), agrees.
“This is nothing new; it’s the normal sort of culling of the herd,” Saunders says. “You have a lot of people that got into the industry in 2020, 2021 and even into early ‘22 because of the lending environment that we were in. That was not sustainable.”
Mortgage rate ‘lock-in effect,’ low housing inventory add more pain to a tough landscape
Higher interest rates and home prices have suffocated mortgage demand in the past two-and-a-half years.
ATTOM found that 1.28 million mortgages were issued in the first quarter of 2024, down 6.8% from the previous quarter, according to data in the firm’s quarterly 2024 U.S. Residential Property Mortgage Origination Report released June 6. That’s the 11th decline in new mortgages in the last 12 quarters, marking the lowest level since 2000.
With less business to go around, mortgage companies have folded, merged or initiated mass staff cuts, leaving behind a trail of tens of thousands of pink slips and shattered careers.
At the start of 2024, there was optimism that mortgage rates would normalize and even fall below 6% as the MBA and other forecasters had predicted. But those hopes were soon dashed as the Federal Reserve made it clear it won’t cut rates until it gets a more consistent handle on inflation.
With the Fed’s higher-for-longer stance on rates, economic analysts have downgraded housing forecasts for 2024. For MBA members who had hoped to see a more meaningful rebound in refinance and purchase volume, it’s not the best news, Walsh says.
“There’s the old adage, and you’ve probably heard this, is that you marry the house and you date the rate,” Walsh says. “So the issue that we really have to pay attention to is what’s happening on the housing inventory side, regardless of what the rates are.”
Existing home inventory has been hard to come in recent years, but it appears that trend is finally turning a corner this year.
At the end of April, total housing inventory reached 1.21 million units, up 9% from March and 16.3% from a year ago, according to the latest data from the National Association of REALTORS®. Meanwhile, the median existing-home price for all property types hit a record-high $407,600 in April, up 5.7% from $385,800 a year ago, NAR reported.
“Home prices reaching a record high for the month of April is very good news for homeowners,” said NAR Chief Economist Lawrence Yun in a statement. “However, the pace of price increases should taper off since more housing inventory is becoming available.”
Walsh points out that even if some homeowners are hesitant to trade in a 2.5% or 3% loan for a new property at today’s higher rates, life is still happening and people still need to buy and sell homes.
“Mortgage will never get to zero, right? So, if we can tackle this inventory issue, the demand is there,” she says.
Top originators do a bulk of the business, leading to attrition at the bottom
Taken as a whole, the LO attrition numbers are jarring. Digging into the numbers reveals that a large share of loan officers—roughly 60%—are not doing any business at all.
Mortgage companies are already facing unprecedented margin compressions on loans, so keeping underperforming LOs who aren’t producing isn’t really an option for mortgage leaders who want to stay in business, says Jeff Walton, CEO and co-founder of Ingenius.
“Everybody’s cut expenses, I think, tremendously. Cutting more expenses is a little bit more difficult, so you have to add volume so you can spread your fixed costs over volume,” Walton says.
Walton also notes that brokerage leaders need to be active in the recruiting market to take advantage of the talent that’s out there so they can increase volume and spread out fixed costs.
“You don’t have to be the biggest to attract loan officers and, point of fact, many loan officers don’t want to go to big shops,” Walton points out. “Big dollar shops get more attention and so you’ve got a certain amount of level playing ground in terms of what loan officers find attractive to go work at.”
Veteran industry executives like Garth Graham, head of mortgage advisory firm The Stratmor Group, say the attrition is mostly due to low producers abandoning ship voluntarily—or being let go.
“With your bottom 40% (of loan officers), the attrition rate’s almost 100%. They cost you money,” Graham says. He adds that it’s critical for companies to track the profitability of each and every MLO (if they’re not doing it already). Further, mortgage leaders who want to stay in business will have to make difficult but necessary decisions when people aren’t performing well.
“They’re going to leave or you’re going to get rid of them, and then they go from one location to another,” Graham says, “so it’s not that they necessarily exit the industry…but they just bounce from company to company.”
How lenders are adapting to survive a cutthroat market
Business may not exactly be booming right now, but loan officers and mortgage leaders can’t afford to sit on the sidelines and wait for a rebound. Instead, they need to go out and find business, meeting potential borrowers where they are today. It seems that those opportunities exist more in the purchase market and, increasingly, in home equity lending.
And if we do happen to see an uptick in refinancing in the near future, it’s going to look at lot different than 2020 and 2021, Graham says.
“If refis come back, it will not spread like peanut butter,” Graham tells RISMedia. “The lenders keep getting in this trap of saying, well, the MBA says the market’s going to have 20% (refi volume) or debating when it might happen. That’s a lot of refi and that’s not going to the industry overall. It’s going to go in heavy, heavy doses to those that have retained servicing for longer periods of time.”
Servicing is another path toward profitability, especially for lenders that capitalized on loan volume during the pandemic and kept those loans in-house, Walsh says.
It’s unlikely that mortgage leaders are done cutting expenses. One area they’re paying closer attention to than ever before is their tech stack. They’re keeping what’s working and ditching what isn’t increasing productivity or efficiency—and that’s a good thing, Walton says.
“The top 40% of loan originators are doing more and more business each year, because they are using sales and marketing automation to enhance what they’re doing to be able to market and scale,” Walton says.
“So they’re able to reach more people and be more successful in the marketplace. So they’re using tech to help them increase their market share. The ones that don’t are running into trouble with it.”
Technology should help LOs reduce the friction in the transaction and make getting a mortgage faster and easier. While it has helped in some ways, the cost to process loans hasn’t gotten any cheaper, Walton points out.
“It just hasn’t happened yet, which I’m shocked by,” he says. “Everybody’s been running towards that for the last 10 years, and it seems like the solutions they’ve come up with have just gotten more expensive.”
Looking to the future
For some long-time mortgage professionals, the freefall of the mortgage industry has led to hard conversations and unexpected career pivots. It’s forcing some to take multiple side jobs to make ends meet as unemployment benefits run out while they painstakingly search for a new full-time role.
It feels like a no-win situation as many mortgage professionals say they feel powerless in the face of macroeconomic shifts they have little say in. But others have taken the proverbial lemons tossed their way to make lemonade, finding parallel ways to use their mortgage backgrounds to build new careers.
Take Craig Davis, for instance.
It was fall 2022, and the former regional lending executive was fresh off a yearlong battle with cancer when he suddenly learned that his company, a national Top 15 mortgage lender, was shutting its doors for good by year’s end. He along with thousands of others would soon be out of work.
Davis, who has been in the industry for more than 20 years, said there was some initial panic. But as he considered his next move, he had an unexpected revelation and clarity.
“I certainly did think about trying to exit the business. But what I found was…this is what I know and it’s who I know. And I love the business. I don’t love the volatility, but I love the business.”
It’s that affinity for mortgage (and its inherent entrepreneurial mindset) that led Davis to pivot into coaching. He founded Ascend Xperience, and business has been booming. Many of his top clients are mortgage companies or top producers hungry for guidance and help to survive the turbulent times ahead, he says.
“We are in a new era of mortgage. And that is margin compression, and that’s not going away,” Davis says, explaining that mortgage companies, originators and branches are generating less revenue per loan. “We have to align and adapt to that.”
Raymond Bramzel, a former senior underwriting manager in Seattle, knows the pain of industry layoffs intimately. He’s gone through it three times since 2022. But, surprisingly, Bramzel doesn’t share the ire others have toward the industry.
“Because I know what happens on the inside, and I understand it from a macro-micro (economic) position, I don’t take it personally,” Bramzell says. “it is what it is. But of course, you have feelings. You’re a human being. You feel rejected.”
Bramzel envisions himself back in the underwriting seat eventually. He says he understands the business forces at play that lead to mass layoffs, but how mortgage companies conduct a layoff can leave a lasting impression. It also gives insight into a company’s moral compass, he says.
For mortgage professionals who are still picking up the pieces and contemplating life after a mortgage role, Bramzel’s advice is simple: “You can’t stand still,” he says, “and you can’t feel sorry for yourself.”
