Don’t be fooled by last week’s mortgage rate collapse.
A combination of elevated mortgage rates, sluggish home sales and inflation continue to plague the housing market workforce, with numerous mortgage lenders and real estate startups shedding employees.
“The U.S. housing market appreciation and the rapid increase in mortgage rates have reduced housing affordability and accelerated the plunge of mortgage origination volumes,” a recent Fitch Ratings report stated.
These trends have exacerbated industry overcapacity, leading to continual layoffs. This week, American Financing Corporation reduced employee headcount by almost two thirds and power buyer Homeward slashed 25% of its workforce as the companies faced headwinds.
And don’t expect the layoffs to stop anytime soon. The resizing of the housing industry will continue as mortgage lenders work to adjust to the new origination environment, said Shampa Bhattacharya, Fitch director of non-bank financial institutions.
“Volume estimates for the fourth quarter and 2023 are coming down further and fresh cost reductions will be needed to adjust to this new level,” Bhattacharya said.
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Here is a list of the companies that issued pink slips this week:
Sending pink slips to 64%
Aurora, Colorado-based American Financing Corporation has started to layoff 63.6% of its workforce this week due to a “dramatic major economic downturn,” according to a WARN notice sent to the Colorado Department of Labor and Employment.
HousingWire sent a request for comments to the company’s spokesperson, but had not received a response at the time this article was published.
The document says the company will lay off 194 of its 305 employees at its headquarters in Aurora “due to unforeseeable business circumstances causing a sudden and drastic reduction in sales,” Benjamin J. Ross, general counsel at the company, wrote in the notice.
The company will impose two rounds of layoffs, which are slated for November 18 and December 23.
American Financing Corporation originated $4.13 billion in the last 12 months, according to the tech platform Modex. Most of the volume is refinancings, which are strongly affected by the surging mortgage rates landscape.
The company’s volumes declined from more than $500 million in March 2022 to less than $100 million in October, Modex’s data shows.
According to Ross, economic conditions and the resulting sales shortfall, which are wholly “outside AFC’s control,” created significant losses for the company.
“Only in late October did it become clear that AFC’s October sales would fall well below projections. And in early November, AFC realized that its November sales and sales for the future would follow suit, being much lower than AFC anticipated only days before,” Ross wrote.
Laying off 25%
“Buy before you sell” firm Homeward slashed 25% of its staff this week in its second round of layoffs this year.
“Over the last few months, things have continued to evolve beyond our initial expectations,” Tim Heyl, founder and CEO of Homeward, wrote in a blog post on November 16.
Noting the need to adjust to the reality Homeward is facing, Heyl announced furloughs and repositions in addition to “parting ways with 25% of our Homeward team.”
November’s layoffs come three months after Homeward announced staff cuts of 20% in August, citing a shifting market and slowing housing demand. Despite recording what Heyl calls the firm’s “strongest month ever” in May and solid second quarter results, he noted that Homeward is staffed for more growth than it is forecasting.
Workers impacted by November’s layoffs will receive severance through the end of the year, two months of health insurance and other incentives, including additional payments based on the employee’s tenure.
The Austin-based power buyer did not respond to requests for additional information regarding the size and positions affected by layoffs, but LinkedIn pegs the company to have between 201 and 500 employees. A total of 442 LinkedIn members list Homeward as their current employer, including part-time roles.
Homeward had plans to be in 20 markets by the end of 2022, according to a release in June that announced an expansion to Washington and Oregon. According to the power buyer, it recorded a revenue increase of five-fold year over year through February 2022.
Cutting hundreds of jobs
Virginia-based Pentagon Federal Credit Union issued pink slips to employees in November amid its mortgage origination volume dropping 85% over a month period.
PenFed reportedly laid off “potentially hundreds of employees,” which was first reported by Credit Union Times. CU Times estimates between 200 to 600 people were impacted across multiple states, in particular the employees who worked remotely in the lending departments.
While media inquiries about layoffs weren’t returned, affected employees include loan officers and a manager in financial reporting as confirmed in headcount reductions.
“My time with PenFed has come to an end,” a loan officer posted on LinkedIn. “Due to an unforeseen market I was one of many impacted by a large layoff yesterday.”
Established in 1953, PenFed offers financial services, including checking, credit cards, personal loans, auto loans, student loans and mortgages.
PenFed originated $5.74 billion in mortgage volume year to date with 36% coming from home equity loans, according to Modex. The credit union’s origination volume declined a whopping 85% to $198.6 million in October from $367.5 million posted the previous month. As of mid-November, the credit union originated $1.6 million in mortgages.
PenFed posted a record volume of $18.9 billion in mortgage origination volume, an annual growth of 128%, according to its 2021 annual report.