While one of the state’s biggest mortgage lenders is axing nearly 5,000 positions nationwide, others see growth opportunities in the current market.

California-based LoanDepot, one of the top mortgage lenders in Connecticut last year, had already cut nearly 3,000 jobs in 2022 when it announced plans in July to further reduce staff.

It’s not alone. Dozens of other companies involved in the mortgage industry have joined LoanDepot in laying off thousands of employees this year after rapidly rising interest rates and changing economic conditions helped bring the refinance boom to an end. And the coming months could see more job losses as lenders adjust to a new environment.

But as economic conditions continue to reshape the industry in the coming months, some Connecticut lenders could end up keeping all their staff, including those that see opportunities for growth as other lenders reduce operations.

“I think there’s opportunity for growth with the disruption in the market,” said Carl Josephson, Newtown Savings Bank’s senior vice president of retail lending. “Several of the national banks and private mortgage banking companies have been laying off, and that’s an opportunity for us as a community bank.”

Business Down 31 Percent

Residential mortgage activity dropped by 31 percent in Connecticut in the first six months of 2022, with mortgage refinances down by 37.7 percent compared to the same period in 2021, according to The Warren Group, publisher of The Commercial Record.

LoanDepot was one of the top lenders in Connecticut last year, ranking second for total number of residential loans processed and for refinances. Like other lenders, LoanDepot saw its mortgage activity in Connecticut drop during the first six months of the year, including a 56.6 percent drop in refinances compared to the same period last year.

The mortgage company released a plan in July it is calling “Vision 2025” to address market conditions and position the company for the long-term, the company said in a statement. The plan calls for a staff reduction from 11,300 at the end of 2021 to 6,500 by the end of this year. About 2,800 of the 4,800 employees who will lose jobs have already been laid off.

Other lenders that have cut staff this year include JPMorgan Chase, Wells Fargo, Movement Mortgage and Nationstar Mortgage, also known as Mr. Cooper. Digital mortgage startup Tomo, which has offices in Stamford, Seattle and Texas, laid off one-third of its staff, about 40 employees, earlier this year.

Some companies around the country have even ceased operations. Texas-based First Guaranty Mortgage Corp. said in a statement at the end of June that it had filed for Chapter 11 bankruptcy protection as it explored restructuring options. The mortgage company, which had processed 250 loans last year and 34 loans this year for Connecticut borrowers, notified the state of Texas that 428 employees were laid off in June.

States receive notifications about certain mass layoffs that are covered by the Worker Adjustment and Retraining Notification Act, such as a layoff involving at least 50 employees who make up one-third or more of the staff at a single site. So far this year, no WARN notices involving mortgage lenders have been filed in Connecticut as of publication time, according to the Connecticut Department of Labor’s website.

More Normalized Market Arrives

Like other companies, Fairway Independent Mortgage added staff during 2020 and 2021 to meet homeowner demand for refinances, said David Lazowski, Fairway’s president of retail sales for the East region. The Wisconsin-based lender issued the sixth-largest number of residential purchase loans in Connecticut last year.

The industry had not seen such demand in 40 years, he said.

“We had to serve our customers in ‘20 and ‘21 and do things on the staffing side that we would not normally do,” Lazowski said. “I think that we’re coming off of a unique time in the space where everyone in banking and mortgage banking just did not have the capacity.”

To meet the demand, Lazowski said, lenders took steps such as hiring more staff than would typically be needed for certain roles, bringing on less experienced employees and paying higher wages. With 2022 turning out to be a more normalized market, similar to 2018 and 2019, he said, Fairway is making staffing adjustments to meet the current market.

Lazowski did not say how many jobs have been cut this year at Fairway, which he said has more than 8,000 employees. He noted that the number was relatively small when compared to other staffing reductions the industry has recently seen, including at LoanDepot, and none required a WARN filing. Fairway is employee-owned, he added, and while the company still must operate responsibly, it can make decisions without having to consider shareholder pressures.

“It’s about consciously and responsibly bringing down capacity in ways that we deem appropriate,” Lazowski said. “It’s nice to know that we don’t have the same pressure and that we can really do this in a way that saves as many jobs as possible.”

Lenders Still See Growth

While several large national banks and mortgage companies quickly reduced staff as rates increased and the economy changed, few Connecticut-based lenders have experienced layoffs so far, said James Morin, board president of the Connecticut Mortgage Bankers Association.

Lenders have been fine tuning their operations, Morin said, and he expects to see some staff reductions in Connecticut in the near future, possibly into the fourth quarter, typically the industry’s slowest month.

“A lot of mortgage companies and banks overstaffed trying to keep up with the supply and demand and the low interest rates and everything else going on in the marketplace, and then very quickly tides turned and the markets shifted,” Morin said. “Those same companies that were overstaffed now are forced to make decisions, which is adding to the downward pressure on needing to right-size your workforce.”

Morin, who is executive vice president of sales at Avon-based Norcom Mortgage, said his company added staff to manage volumes in 2020 and 2021. But the mortgage company has not laid off any employees this year, Morin said, instead adding staff as it continues to grow in 2022 with a focus on the purchase market.

While based in Connecticut, Norcom is a national lender, and Morin said the company has hired staff from other parts of the country to work remotely, taking advantage of the layoffs happening nationally. While the layoffs most often target operations and support staff, loan officers have become available to hire as well. Losing team members to layoffs has affected the day-to-day work of loan officers, Morin said, prompting some of them to look for opportunities with other lenders.

Opportunities in Disruption

Not all lenders added staff to manage the refinance boom.

Newtown Savings Bank had undertaken an initiative in 2018 and 2019 to improve mortgage lending processes and gain efficiencies, said Josephson, the bank’s senior vice president of retail lending. When the pandemic started, the bank had the capacity to keep rates low and handle both the purchase and refinance volumes throughout 2020 and 2021 using existing staff, he said. The $1.8 billion-asset Newtown Savings Bank was among the top 10 bank mortgage lenders in Connecticut in 2021.

“Obviously, there was some overtime but not an extraordinary amount,” Josephson said. “It was really just creating the capacity prior to the pandemic hitting.”

Newtown Savings Bank did about double the volume in 2020 and 2021 compared to a typical year, he added. Like Lazowski, Josephson described the current market as more normal, with volumes similar to those the bank had in 2019. He continues to forecast growth in mortgage volumes for the rest of 2022.

As positions within the mortgage department open up, Newtown Savings Bank continues to fill those roles, Josephson said, including two current openings for support roles in the retail mortgage group and another two for support staff on the mortgage servicing team.

Newtown Savings Bank hires from the Connecticut region, and Josephson said he has seen more candidates applying for these roles.

The disruption caused by layoffs makes qualified mortgage staff available, and Josephson sees another opportunity for a community bank like Newtown Savings Bank: picking up mortgage volume as other companies cut their operations.

“One thing Newtown Savings Bank does, we focus on the communities we serve,” Josephson said. “That differentiates us from private mortgage companies and national banks, because we know we’re affecting our communities.”