Cost Cutting Spreads Across the Mortgage Sector
Slapped sober by weaker profit margins and declining originations, mortgage bankers of all stripes are engaging in a mini-tsunami of cost cuts the likes that haven't been seen since the doldrums of 2000.
Last month, Washington Mutual of Seattle became the poster child of mortgage cost cutting, announcing that it is slashing its mortgage workforce by a stunning 19% (2,500 jobs), while closing 10 processing sites.
The job cuts at WaMu are - by far - the largest known layoffs by any mortgage firm during the recent industry downturn.
The only lender that has made cuts close to WaMu's is Ameriquest Mortgage of Orange, Calif., which along with its wholesale division, Argent, recently trimmed 1,400 jobs.
Industry executives told Mortgage Servicing News that rumors of layoffs and office closings are becoming the norm.
It also appears that Southern California, where many nonprime lenders are headquartered, is bearing the brunt of the cutbacks.
A recent e-mail sent out by the Newport Beach office of Grubb & Ellis estimates that 500,000 square feet of office space in the Anaheim area will come back on the market because of mortgage-related cutbacks.
According to Grubb, mortgage bankers looking to sublease their contracted space include the ailing Acoustic Home Loans, and Master Financial, as well as Argent. (Acoustic and Master are both based in Orange.) Recently, H&R Block announced job cuts at its mortgage services unit.
Oliver Fleener, a Grubb & Ellis vice president, told National Mortgage News that mortgage firms have been driving office space demand in Orange County the past 18 to 36 months. "They've been responsible for a lot of big deals," he said, adding that "rumors" of mortgage jobs cuts are accelerating.
Mr. Fleener, however, does not see a collapse in the Orange County office market because of the mortgage cutbacks. "Mortgage firms are well known for jamming a lot of people into their space," he said. "We still have great demand here." But Mr. Fleener says his intelligence is telling him that young executives who started net branch operations are the ones suffering the most.
Among the nation's top five subprime funders, all are based in Southern California with the one and two ranked firms - New Century and Ameriquest - based in Irvine and Orange, respectively.
Over the past two months, MSN has broken the news of job cuts by many lenders, prime and nonprime alike.
Washington Mutual, the nation's third-largest residential funder, said it made the cuts because of declining loan demand.
A company spokesman clarified that even though the thrift is sending some of its back-office jobs overseas to outsourcers, none of those positions, at this time, are mortgage related. He said WaMu is cutting only "support functions" and no loan officers, account executives or sales people are being let go.
He said the laid-off workers are being given severance and "job search assistance."
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