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Mortgage industry cautiously hopeful
Many believe steady growth will return soon to area housing market
September 18, 2006
By ANDREW D. SMITH / The Dallas Morning News
The party is officially over. Rising interest rates, vanishing refinance business and declining home sales are driving people away from mortgage banking and docking workers who remain.
But industry insiders regard the change as a return to normalcy rather than a disaster. Texas, especially, is experiencing a mild downturn that may soon give way to a healthy period of slow-but-steady growth.
Industry employees can expect layoffs and lean times over the short term, industry experts say. But survivors should fare well, particularly those who can reach traditionally underserved customers from the region's growing minority communities.
"The Texas housing market is doing considerably better than the national housing market and much better than the markets in Florida and California," said Ben Streusand, president of the Texas Mortgage Bankers Association.
"Home prices here never shot up, so they're not plunging now. What's more, Texas has seen more job growth, particularly around Houston and Dallas, than the rest of the country, and job growth is the biggest driver of housing sales."
Nationally, mortgage loan application volume fell 26 percent from August 2005 to August 2006, according to the Mortgage Bankers Association in Washington.
Still, according to the most recent numbers from the U.S. Bureau of Labor Statistics, industry employment actually increased 14 percent to 503,100 in June compared with June 2005.
Smaller drops
Mike Fratantoni, the MBA's senior economist, expects employment to fall soon but not nearly so much as in previous housing downturns, when industry jobs dropped by roughly the same percentage as housing sale revenues.
"Technology has made the industry more efficient," Mr. Fratantoni said. "It didn't hire as much as normal during the last years of the recent boom, so it won't have to lay off as much as normal during this downturn."
That said, Mr. Streusand's gut tells him that mortgage banking employment in Texas has dropped considerably in recent months though not as much as in Florida or California. And, he says, incomes are down for industry survivors.
Fewer sales, naturally, translate into lower commission payments, but even the salaried employees have felt the pinch. Bonuses have plummeted or been eliminated.
As for the possibility of layoffs, lenders have little reason to cut commission-based jobs. Indeed, local mortgage banks are still hiring new salespeople even in today's lean market.
Big banks such as Wells Fargo, Chase and Bank of America have all been hiring loan officers this last year despite rising interest rates. Home loan specialists have done likewise.
"We may want to cut back-office costs and run a leaner corporate ship, but we always need excellent loan officers. They may be even more important in down markets because the only way to increase business now is by increasing market share," said David Motley, president of Colonial National Mortgage in Fort Worth.
Support positions
Salaried support jobs are another story. A company that makes fewer loans needs fewer loan processors. Even companies with slightly rising revenues may cut back-office staff (and work survivors harder) to keep profit growth strong.
It is, essentially, a trade-off, Mr. Motley said. Industry employees either have secure jobs but insecure, commission-based incomes, or they have less-secure jobs that pay steadily so long as they survive.
Looking beyond the short term, mortgage banking jobs will focus ever less on paper work - machines will keep automating such things - and ever more on salesmanship and customer service.
The biggest challenges and the biggest opportunities will lie in serving nontraditional customers: young adults, moderate earners, recent immigrants, and racial minorities.
Unlike middle-aged and affluent Anglos, most of whom already own homes and have mortgages, the vast majority of those other groups have never taken out a home loan.
"There is incredible demand in the industry now for people who can build networks of connection among groups who have not thus far taken advantage of homeownership," Mr. Motley said.
Commission work in mortgage banking demands strong sales skills - and a willingness to weather major income fluctuations.
Interest rates, economic expansion and dumb luck can sometimes conspire to double - or halve - a person's paycheck from one year to the next. The only protection is to save heavily during the fat years or be willing to cut expenditures during the lean ones.
"It's a feast-or-famine scenario," said Mr. Streusand, who heads Houston's Home Loan Corp. in addition to the TMBA.
"My hunch is we're going to have some pretty lean times till the middle of next year - something like a third of the companies in this business are losing money right now - but once the market has shaken out, I think we'll have a strong rebound."
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