A drop in mortgage lending volumes to the lowest level in over a decade is forcing lenders to consider new cost cuts and staff reductions. The lack of activity comes despite a boost from low interest rates that has sparked a wave of refinancings, and is prompting lenders to face the prospect that refis and home purchases may remain moribund for an extended period.
"This is the bleakest I've seen the forecast in 26 years," said Mick Rizzo, vice president and operations manager in Marshall & Ilsley Bank's mortgage unit.
Mortgage origination volume fell 35% in the first quarter, to $352 billion, according to figures compiled by National Mortgage News and the Quarterly Data Report. (See related story on this website.)
For the entire year, residential loan production is expected to top out at around $1 trillion and to remain at that level in 2012, according to a forecast from the Mortgage Bankers Association. That would be the lowest level of originations since 1997, according to NMN.
During past downturns, low interest rates helped pull mortgage lending out of the doldrums. This time around, however, lenders appear resigned to the notion that refinancings have run their course. With housing starts and permit issuances flat, there simply are not enough purchases of new and existing homes to offset declines in refinancings.
"If anyone is depending on the market to rescue them, I'm not sure that's a sound strategy," said Willie Newman, head of residential mortgage originations at the $4.6 billion-asset Cole Taylor Bank, a unit of Taylor Capital Group Inc. of Chicago.
