Blame Citi layoffs on shifting mortgage landscape
Institutions reduce staffing levels to match lending demand
As demand falls for new loans, especially refinancings, banking institutions are cutting back and letting go of workers who specialize in originations.
The trend continued this week with CitiMortgage (C) announcing the elimination of 1,000 positions in underwriting and mortgage-default operations, explained Citigroup spokesperson Mark Rodgers.
More than 750 job cuts will take place in Las Vegas, 100 cuts will happen in Irving, Texas, and the remainder will take place around the country.
"While difficult, these actions reflect our ongoing efforts to increase operational efficiency, adapt to changes in the marketplace, and position the business for the future," Rodgers said.
He added, "Citi will help impacted employees identify opportunities both inside and outside of the company. Impacted employees will be eligible for Citi severance benefits and transition support."
The massive layoffs reflect the banking sector’s efforts to restructure the mortgage side of their businesses to keep up with market realities.
The rise in interest rates and an increased competition within the sector continues to put pressure on the lending business.
"The mortgage refinance business historically has been a cyclical industry, enjoying periods of strong growth followed by periods of decline volumes," pointed out Royal Bank of Scotland (RBS) analyst Sarah Hu.
She added, "Given that, I don’t think the layoff from large banks is a real surprise. However, I do think all of these layoffs are because of rising mortgage rates we’ve seen over the recent months."
Additionally, some job cuts could be due to a dramatic decline in Home Affordable Refinance Program refinances, which is not directly related to rates movement, Hu noted.
Citigroup is not alone in this transition. As demand for loan servicing falls and the originations market becomes purchase-heavy, banks are caught trying to build new streams of revenue while simultaneously getting rid of services now in low demand.
However, it will not be clear until next year the location and amount of jobs on the line.
Wells Fargo (WFC) recently announced 763 mortgage-related layoffs. JPMorgan Chase (JPM) wasn't far behind, cutting more than a thousands jobs combined in Florence, S.C., and San Diego. Falling demand for loan servicing prompted those cuts as well.
Back in February, JPMorgan said a series of cuts over the course of the next year would lead to 13,000 to 15,000 layoffs.