A growing mortgage business wasn’t enough to improve JPMorgan Chase’s (JPM) revenue during the third quarter, with the mortgage lending giant's revenue dropping from $25.9 billion to $23.9 billion.

Mortgage banking income reached $705 million in the third quarter, up 13% from last year.

On the reverse side, sister bank Wells Fargo (WFC) saw its mortgage banking revenue soften as income fell to $1.6 billion, down from $2.8 billion a year ago.

However, both mega banks posted weaker mortgage origination demand, leaving them with no choice but to take a beating thanks to drops in refinancing.

JPMorgan mortgage originations dropped 14% from a year earlier to $40.5 billion and 17% from the second quarter, including purchase originations of $20 billion, up 57% from the previous year, and also up 15% from the prior quarter.

Wells Fargo's residential mortgage origination volumes fell from $112 billion to $80 billion during the quarter.

It’s been a long-running trend for many banking institutions cutting mortgage staff as refi volumes continued to drop.

Many mortgage analysts attribute the rapid tapering of refinance demand to sharp increases in mortgage rates, forcing the size of the refinance market to shrink, and as a result, the refi boom has dramatically come to an end.

Earlier this year, JPMorgan announced they would reduce head count by 13,000 to 15,000 employees in the mortgage unit through 2014.  

This number is on top of the 4,000-person reduction in the consumer banking unit of the banking giant.

Similarly, Wells Fargo announced plans to cut 20% of its mortgage production staff, with refinancing activity accounting for 70% of the bank’s mortgage applications during the first half the year, but that has dropped to roughly 50% with an expected decrease to happen in the future.

Given the earnings results of these two leading mortgage lenders, the market is left wondering if this will be a permanent fix or a temporary shift in the mortgage environment.