Now that they are required, state and mortgage industry officials expected 20,000 applications at the Division of Banks for existing loan officers by the initial deadline of May 27. They received 5,643.
“It’s really thinning [the ranks of loan officers],” said a glum Jim Hastie, president of United Funding in Milford, which has lost 40 percent of its staff and had to close one of three offices in recent months because of the credit crunch.
“This is something we once thought was a hot profession,” added Massachusetts Mortgage Bankers Association Executive Director Kevin Cuff. “Maybe it’s not, anymore.”
Indeed, even as the state’s unemployment rate has declined in recent months, employer data submitted to the Massachusetts Department of Labor and Workforce Develop-ment show mortgage industry job losses increasing.
The number of people employed in the “non-depository credit intermediation” field, most of which is mortgage banking at non-bank companies, according to DLW, went down from a high of 10,856 in July 2005 to 8,675 last September, the most recent figures available.
The foreclosure crisis has made easy mortgage credit a thing of the past. Many subprime lenders have gone out of business, and even government loan purchasers Fannie Mae and Freddie Mac are tightening standards on conforming loans, making it harder to get formerly qualified customers into loans.
The $500 fee originators will have to pay for their new license, and increased net-worth requirements for broker and lender companies set to take effect in December, have posed additional concerns for the state’s industry.
Cuff suggested the Division of Banks’ proposed credit history-check requirement for loan originators may be scaring more applicants off.
But that requirement – which has long been in place for the owners, officers and branch managers of DOB-licensed companies – won’t go into effect until after July 1, DOB Chief Operating Officer David Cotney said.
“I would hope people aren’t afraid of the credit check,” Cotney said, noting that DOB is still reviewing industry comments on it.
In fact, he said, if a new licensee was worried about having to submit to such a check, “they’d be rushing to get [their application] in before July 1.”
Loan originators working prior to Nov. 1 had until May 27 to file their license application, while those who started working after then have until June 30. No originator without a license will be allowed to work after July 1.
Foreclosing Their Careers
Cuff said he’s been taking calls at MMBA about originators who once helped put people into homes now going into foreclosure or bankruptcy themselves.
Some who have left the industry have still managed to land on their feet.
After 11 years in subprime mortgage sales, in which he had risen to the level of branch manager for the Worcester office of Accredited Home Lenders’ Home Funds Direct divi-sion, Al Ricca was suddenly on the wrong end when the company shut down its U.S. retail lending operations last August.
“I spoke with my wife, and we determined that maybe it was time to find a new career, because there were too many uncertainties in subprime,” said the 47-year-old Ricca, who now works as a sales representative for Liberty Mutual.
It’s not just in sales that the job pool is shrinking.
“The lenders we do business with are backed up, because they’ve laid so many people off,” Hastie said. Manual approvals that most use, following the automated approval process of a Fannie Mae or Freddie Mac loan, have of late been backed up seven to 10 days instead of the previous one to two days it used to take to get such approval, he said.
The bright side from a borrower’s point of view seems to be Federal Housing Administration loans, Hastie and United Funding Chief Executive Officer Eric Nelson said.
United Funding got its FHA lending license a year ago. Nelson said that type of loan works for many borrowers because of the more flexible guidelines it allows, including credit scores less of than 600.
His company is also planning to open a reverse mortgage division soon. Like many lenders, it’s recognizing that the tight credit market is making it harder for people that need credit to get it. Tapping into their home’s equity, which a reverse mortgage allows senior citizens to do, is one way they can still get it.
Hastie said with these and other strategies, he and Nelson are determined to ride out the storm.
“We’re thrilled to still be here,” he said. “And, we know we are going to be here a year from now and 10 years from now.”
But not everyone is making the same decisions.
Applications for mortgage company licenses are down about 20 percent this year, according to the Division of Banks, which was accepting renewals through May 31. Just 1,184 broker companies renewed of 1,486 applications sent out, while 413 of 488 lender companies have done so.
On Main Street in Milford, things look about the same.
“On the street I’m on, two years ago, there were seven mortgage companies in a half-mile radius,” Hastie remarked. “Now, it’s down to three.”
