Although the mortgage industry has shed 103,200 jobs since employment peaked at 504,700 in October 2006, the deteriorating housing market will need to purge another third of the roughly 400,000 remaining jobs in 2008, says a research analyst at Friedman, Billings, Ramsey & Co. (FBR).
Research analyst Paul J. Miller has some unwelcome news for more than a hundred thousand mortgage professionals: your services are no longer needed.
In lowering his initial forecast of residential originations for 2008, Miller dropped his prediction from $2.2 trillion to about $1.8 trillion.
"Bottom line, too many loan brokers are chasing too few loans!" wrote Miller in a research note.
"Until the mortgage industry eliminates back-office personnel and loan officers, which could take several quarters, we believe the mortgage industry will not generate an economic profit."
The FBR analyst suggested that the mortgage industry has entered a historically unprecedented period where older criteria for predictions no longer apply.
In the past, Miller wrote, the level of annual originations was more or less tied to the fluctuations of interest rates during the year, making it difficult to present yearly forecasts.
However, two factors have arisen in the largest housing slowdown in U.S. history to make predictions more simple this time around: diminished liquidity and tightened lending standards.
Miller wrote that "lower interest this time around is having only a marginal impact on origination volume as reduced liquidity coupled with stricter underwriting standards are driving origination volumes lower."
The analyst suggested that employment serves as a decent barometer of how the mortgage industry is faring.
Although mortgage jobs continued to climb well after originations began to fall last year, the number of industry professionals has declined by roughly 20% since peaking in October 2006.
Miller says that the mortgage industry probably will not reach a balance between loan fundings and employment before major lenders will generate a profit once more.
Posted on Tuesday, December 18, 2007
http://www.mortgageledger.com/modules.php?name=News&file=article&sid=2707
