Mortgage Companies Cut Staffs as Refi’s Plummet By SHELLY GARCIA Senior Reporter It’s official, the refinancing market is dead. So-called refi’s in the fourth quarter are expected to drop to 49 percent of the home mortgage loans originated, down from 68 percent in the third quarter, according to the Mortgage Bankers Association. And by the first quarter of 2004 they are likely to fall further to 39 percent. The steep decline has already forced layoffs and closures of some mortgage loan offices, and more are expected to follow. “I think we saw refi’s disappear very quickly,” said Richard Gale, a director at California Mortgage Bankers Association. “While they may have been 75 percent or 80 percent (of the market) they really disappeared quickly.” E-Loan Inc. laid off 49 employees earlier this month, about 5 percent of its workforce. And earlier Washington Mutual announced it would cut about 4,000 of some 22,000 employees in its mortgage banking business Even mortgage behemoth, Countrywide Financial Corp., has seen refinancing activity fall to $16.6 billion for the month of October, compared to $25.3 billion for the same month last year. The dramatic falloff was not unexpected. Created by a steady decline in interest rates over the past several years, the refinancing market was certain to cool once mortgage rates began to rise. But after a brief spurt up into the low 6 percent range, mortgage rates have once again come down to the high 5 percent range. On Thursday, Nov. 20, the rate for a 30-year fixed mortgage plunged again to an average of 5.83 percent, from 6.03 percent in the previous week. Just as important in putting a damper on refinancing activity as rate changes, many mortgage brokers say, is the fact that, after several years of frenzied activity, anyone who could refinance has already done so. “I’m still doing a few refi’s for various issues, but in general the refinance craze is over, said Aaron DesMarais, a loan officer at APR Mortgage Inc. in Northridge, “because people have already done it.” Larger drop predicted The Mortgage Bankers Association projects even larger declines in the coming year. According to the trade association, refinancing as a percentage of mortgages originated will decline to 25 percent by the second quarter of next year and 22 percent by the third quarter. “We saw wave after wave as rates were coming down and some people refi’ed four or five times over the past few years,” said Gale. “So there’s less people to refi.” Gale said the hardest hit have been direct to consumer Internet and call center mortgage banks. The impact has been less severe on local, brick and mortar mortgage companies who develop relationships with local brokers and builders. “The companies ingrained in local communities that call on realtors and builders, they are probably not impacted as badly,” said Gale, but everybody has reduced their staff to some degree.” Many mortgage companies hired temporary staff to handle the additional workload as the market was on an upward growth trend. “So a lot of the temps are gone,” said Gale, but certainly some of the permanent staff is gone as well.” So far, there has been little letup in the pace of home sales, and that has helped mortgage companies to make the transition to the changing marketplace. But with expectations that mortgage rates will continue to rise through the coming year, another, albeit smaller decline is expected in new home mortgage originations as well. According to the MBA, interest rates on a 30-year fixed mortgage will creep up to 6.1 percent by the second quarter of next year, and 6.5 percent by the fourth quarter of 2004. Loosening up? The slowdown may be good news for those who have difficulty qualifying for a mortgage. With business harder to come by, mortgage bankers are expected to show greater willingness to help those customers find financing solutions. There’s also increasing evidence that consumers will seek alternatives to refinancing’s in order to pull cash out of their homes, and some mortgage companies are gearing up for a boom, or at least a mini-boom, in home equity loans. “People don’t want to touch their first (mortgage), so the home equity market has taken off,” said Gale. Countrywide is also stepping up its loan servicing activities, everything from collecting and processing loan payments to handling inquiries from borrowers, all services that generate fees for the company. Still, the Calabasas-based company is anticipating that its mortgage lending business will fall to about $300 billion next year, from $420 billion this year. “The current year is quite simply an extraordinary year that is not likely to be repeated,” said Angelo Mozilo, Coutnrywide’s chairman and CEO in a conference call to analysts last month.