Bank Earnings Hurt By Cooling Market

Though quarterly numbers showed a slight improvement, loan applications are still down when compared to last year in the same quarter. Even more concerning, the number of new loan applications is continuing to drop. Nationwide, home purchases have decreased, and high rates have kept refinances from improving the market. National rates are still on the rise with little relief in site, causing concern in the mortgage industry and creating a more challenging environment for loan professionals.

With the increase of rates comes a smaller spread for profit in the current market. Brokers and lenders that would normally be charging fees for loans now have to drop the fees to remain competitive. Internal costs need to be cut in response to less fees, often times resulting in a cut in the work force; Washington Mutual, for example, has initiated a closing of more than 100 home loan centers, freeing up almost 25% of their resources and releasing almost the same percentage of their workers. The closures and consolidation of staff are a normal response to cooling markets, but seldom affects the number of workers as seen in current times.