The recent market decline for mortgage lenders may have a shorter lifespan than other cycles in the past, mainly as a result of the layoffs imposed by nonbanks. According to Stratmor Group’s Senior Partner, Jim Cameron, it might be true that several nonbanks got into this decline with a sufficiently large capital war chest. Still, these offsets are more of effects of warehouse and investor promises leading several lenders to cut costs strategically.

Nonbanks account for more than 60% of the mortgage sector production and are more likely than banks to cut capacity swiftly. Cameron stated that nonbank turnover rates for processors, underwriters, and closers were frequently in the range of 35% to 50% in the first half of 2022, compared to 18% to 22% for banks, based on current statistics from the Mortgage Bankers Association (MBA) and Stratmor.

Based on a report from a sector of analysts at Keefe, Bruyette & Woods Inc, so far, the declining market has led to a considerable reduction in the total production revenue of mortgage lenders by about 2.7% quarter over quarter and 18% year on year, to 396 basis points in Q3 of 2022. Furthermore, it is predicted that the industry’s profitability will likely still face challenges with season weaknesses in Q4 of 2022 and Q1 of 2023. The industry’s recovery will probably take time, depending on the pace at which stakeholders are willing to cut capacity.

In the latest round of layoffs by nonbank lenders, Home Point Financial Corporation fired about 100 employees across four states on the 17th of November, according to WARN notices filed by the organization. To read more, click here.