Mortgage activity expected to plunge
Bankers predict closures, job losses
San Diego ? For mortgage lenders, a two-year party is ending, raising worries about the hangover to come.
Bankers, who gathered Wednesday in San Diego for a convention, predict their business will fall by 50 percent next year, with an accompanying loss of industry jobs and smaller brokers.
“We think 100 to 200 mortgage companies will disappear in the next 2 to 2 1/2 years,” said Douglas Duncan, chief economist for the Mortgage Bankers Assn.
Low interest rates have powered a record-setting home refinancing boom in the past two years, with lenders adding upwards of 150,000 workers to help process paper, work with customers and arrange financing. But as mortgage interest rates have risen to more than 6 percent from a low of 5.2 percent for 30-year fixed-rate loans in early summer, refinancing has become less attractive.
Duncan estimates that mortgage originations will total $3.3 trillion this year, with about 18 million to 20 million loans — a level he calls “not sustainable.”
Next year, originations are expected to fall to $1.6 trillion, with fewer than 10 million loans. The result will be branch closings and job losses, up to 100,000 of the new positions added during the boom, Duncan said.
“Not necessarily all the disappearing companies will go out of business. Many will be absorbed by mergers and acquisitions,” Duncan said.
Duncan’s comments come at a particularly sensitive time for U.S. economic policy-makers. Since the late 1990s, the housing industry has been one of the few bright spots in an otherwise unenthusiastic economy where unemployment now hovers at 6.1 percent.
Refinancing and low interest rates are credited for much of the buoyant consumer spending in recent years, spending that propped up economic activity when business investment was slack and the stock market was falling.