In last month’s Newsletter, we discussed why so many CEO’s are walking out the exit door. In this issue, we’ll talk about the staggering number of loan officers that have left or are leaving the industry.
Christina Bennett loved the mortgage industry, but after undergoing multiple layoffs, she says the feeling wasn’t mutual. Bennett spent years in and out of mortgage roles in various underwriting posts, rising to the management ranks in her last company, Caliber Home Loans, where she spent nearly eight years.
Although she had been through layoffs before, nothing prepared Bennett for what she faced in April 2022 when she and dozens of other employees were herded into a group Zoom call and unceremoniously laid off en masse. Moments later, her computer access was cut off and that, as they say, was that. “The way companies have treated their employees has been horrific, it’s been inhumane,” says Bennett, who lives in Conifer, Colorado. That experience was the final straw to convince Bennett to walk away from the industry for good.
Layoffs and Plummeting Production
She’s not alone. Mortgage companies big and small have laid off tens of thousands of people since 2022. With more people working remotely since the coronavirus pandemic, news of these cuts are increasingly delivered over Zoom or video conferencing, adding a layer of stony-faced detachment to the proceedings. Many of us remember the Sprout Mortgage saga, where 90% of the company was informed (via a company-wide conference call) that they were closing their doors, effective immediately.
The data tells a sobering story. According to Ingenius, a mortgage analytics and consulting firm, the total number of mortgage loan officers (MLOs) who closed at least one loan in the previous 12 months, peaked at 178,270 in June 2021. By January 2024, though, that figure plummeted 47% to just 93,938 MLOs.
That’s nearly half of the producing loan officers in the United States who are no longer in business. Plus, those numbers don’t count the thousands more operational roles—loan processors, underwriters, compliance analysts and others—that have also disappeared. Data from the Nationwide Multistate Licensing System (NMLS) mirrors a similar exodus, with active, state-licensed MLOs who originated at least one loan within a quarter peaking at 124,804 in the fourth quarter of 2021. But by the end of 2023, that figure plummeted by 36% to just 80,230 MLOs, NMLS reported.
Top Originators do the Bulk of the Business, leading to Attrition at the Bottom
Taken as a whole, the LO attrition numbers are jarring. Digging into the numbers reveals that a large share of loan officers—roughly 60%—are not doing any business at all. Mortgage companies are already facing unprecedented margin compressions on loans, so keeping underperforming LOs who aren’t producing isn’t really an option for mortgage leaders who want to stay in business, says Jeff Walton, CEO and co-founder of Ingenius. “Everybody’s cut expenses, I think, tremendously. Cutting more expenses is a little bit more difficult, so you have to add volume to spread your fixed costs over volume,” Walton says. Walton also notes that brokerage leaders need to be active in the recruiting market to take advantage of the talent that’s out there so they can increase volume and spread out fixed costs.
Veteran industry executives like Garth Graham, head of mortgage advisory firm The Stratmor Group, say the attrition is mostly due to low producers abandoning ship voluntarily—or being let go. “With your bottom 40% (of loan officers), the attrition rate’s almost 100%. They cost you money,” Graham says.
How Lenders are Adapting to Survive a Cutthroat Market
Business may not exactly be booming right now, but loan officers and mortgage leaders can’t afford to sit on the sidelines and wait for a rebound. Instead, they need to go out and find business, meeting potential borrowers where they are today. It seems that those opportunities exist more in the purchase market and, increasingly, in home equity lending. And if we do happen to see an uptick in refinancing in the near future, it’s going to look at lot different than 2020 and 2021, Graham says.
“If refis come back, it will not spread like peanut butter,” Graham tells RISMedia. “The lenders keep getting in this trap of saying, well, the MBA says the market’s going to have 20% (refi volume) or debating when it might happen. That’s a lot of refi and that’s not going to the industry overall. It’s going to go in heavy, heavy doses to those that have retained servicing for longer periods of time.”
Servicing is another path toward profitability, especially for lenders that capitalized on loan volume during the pandemic and kept those loans in-house, Walsh says.
It’s unlikely that mortgage leaders are done cutting expenses. One area they’re paying closer attention to than ever before is their tech stack. They’re keeping what’s working and ditching what isn’t increasing productivity or efficiency—and that’s a good thing, Walton says.
“The top 40% of loan originators are doing more and more business each year, because they are using sales and marketing automation to enhance what they’re doing to be able to market and scale,” Walton says.
Looking to the future
For some long-time mortgage professionals, the freefall of the mortgage industry has led to hard conversations and unexpected career pivots. It’s forcing some to take multiple side jobs to make ends meet as unemployment benefits run out while they painstakingly search for a new full-time role.
Raymond Bramzel, a former senior underwriting manager in Seattle, knows the pain of industry layoffs intimately. He’s gone through it three times since 2022. But, surprisingly, Bramzel doesn’t share the ire others have toward the industry. “Because I know what happens on the inside, and I understand it from a macro-micro (economic) position, I don’t take it personally,” Bramzell says. “it is what it is. But of course, you have feelings. You’re a human being. You feel rejected.”
Bramzel envisions himself back in the underwriting seat eventually. He says he understands the business forces at play that lead to mass layoffs, but how mortgage companies conduct a layoff can leave a lasting impression. It also gives insight into a company’s moral compass, he says.
