Mortgage Lenders Turn ‘Desperate’ as Soaring Rates Roil Industry
Danny Meier had one of the busiest years of his career in 2021.
The 36-year-old closed roughly $799 million worth of loans at Academy Mortgage Corp., ranking him among the top producing originators in the US. Now, he’s bracing for a 20% reduction in business and recently had to cut several staff.
“It’s scary,” Meier said in a phone interview. “We have sellers panic listing, and then you have buyer fatigue and buyers stepping out altogether really fast.”
Business has started to evaporate across home-lending firms in recent weeks, after the Federal Reserve boosted borrowing costs to tame decades-high inflation. US mortgage rates are at levels last seen more than a decade ago. That's hurting affordability for first-time buyers, slowing down sales of previously owned homes and making it unattractive for existing owners to refinance.
Already, the fallout is cascading across the industry. Wells Fargo & Co. has warned that income from its mortgage-lending business may drop significantly in the second quarter. Employees at the bank’s home-lending division and its rival JPMorgan Chase & Co.’s unit are being laid off or reassigned to different areas. Real estate brokerages such as Compass Inc. and Redfin Corp. also announced plans to cut their workforces earlier this month.
“Layoffs are happening everywhere,” Meier said. “People are cutting rates, cutting costs, with desperate attempts to gain business.”