Mortgage Company Woes May Hurt O.C. Job Market
Bad credit home loans aside, mortgage lenders face a tougher environment this year in Southern California, according to the Orange County Register.
Bose George, an analyst with Keefe, Bruyette & Woods in New York, said loan volume nationwide will likely decline 10-15 percent this year and bad credit home loan volume could fall even further. Lenders issued about $500 billion in loans in the first nine months of last year.
The combination of tighter underwriting standards and investors losing their appetite for risky loans could drag down volume. George said lenders last year went well past their pool of ideal customers.
“Now on the edges, they need to retrace and cut out borrowers who shouldn’t really be taking home mortgages,” George said.
David Liu, director of UBS Investment Bank’s mortgage strategy group, said that subprime lending is still a somewhat crowded field. Further industry consolidation is likely.
Nationwide there are 40-50 big subprime (or bad credit mortgage) lenders, so a few closing their doors or being sold won’t solve the oversupply problem.
“You probably need more dramatic changes in the market,” Liu said.
In any case, job growth in Orange County will slow this year as a result of cutbacks by real estate-related companies, including mortgage lenders, said Esmael Adibi, director of the A. Gary Anderson Center for Economic Research at Chapman University in Orange.
Experts say California mortgage loan companies could shed 2,000 to 3,000 local jobs this year, a daunting figure that comes on top of cuts last year.
State figures show lending support positions (mortgage broker, loan servicing, etc.) dropped 13 percent for the 12 months ending in December, or a total loss of 1,800 jobs. More direct lending jobs slid by less than 1 percent, or about 100 spots.
It’s a reversal from years of job growth by lenders and other financial firms during the housing boom. The financial industry added about 28,000 jobs from 2002 to 2005, economist Adibi said.
“Overall, this sector is going to feel like a recession,” Adibi said of mortgage firms. “You should expect to see a much weaker employment base in all of the sectors related to real estate.”