Last month JP Morgan Chase announced a pullback from residential mortgage lending and their expectations for 2014
Home lending has been "the most painful business ever," JPMorgan CEO Jamie Dimon said at an investor presentation, when they announced another cut of 6,000 mortgage jobs for this year, on top of 11,000 last year. With that came a forecast that its mortgage division would not turn a profit this year, though Dimon restated ‘we are here for the long game’.
The announcement from Chase, the second-largest home lender behind Wells Fargo, is a strong reminder that the housing market has not yet fully recovered from the downturn, with home sales and overall mortgage lending still below prerecession levels—and not expected to turn a corner any time soon.
"We are desperately trying to right-size our staff to what we think the size of the market will be," says Mark Mason, vice chairman and CEO of HomeStreet, based in Seattle, who remains a bull on mortgages. "It shows how tough the originations business is today, and I was struck by the fact that Chase expects to lose money [in mortgages] in the entire calendar year 2014."
Donavon Ternes, chief operating officer and chief financial officer at Provident Savings Bank in Riverside, Calif., says the verdict is still out on whether homebuying activity will gain further momentum this year. Some lenders may jump at the chance to hire loan officers from JPMorgan Chase and potentially steal market share, he says.
But the outlook still seems bleak.
"Everybody is cautious," says Ternes. "The pullback is significant. You only have to look at the refinance numbers [industrywide] to understand that every mortgage banker's volume was down significantly in the fourth quarter and that business is not going to pick up any time soon."
The $1.1-billion-asset Provident Savings has already cut 72 jobs in its mortgage division, a 23% reduction from June to December of last year. But the cyclical nature of the mortgage business also makes it tough to predict, Ternes says, especially since home sales typically hit a seasonal lull in the first quarter.
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