With the refinance boom wavering and government-related forbearance set to eventually end, some companies are reverting to a recession-era strategy that’s not been widely used in years: cross-training licensed loan officers to handle modifications.
Equipping licensed loan officers to handle requests for modified payments, as well as new loans, could make for an easier transition to more gradual mortgage hiring if a
Friday’s market indicators were in line with such a scenario following the Bureau of Labor Statistics’ latest job report.
That improved but less-than-ideal report initially drove the rate-indicative 10-year Treasury yield to a 2021 high of 1.63%. Also, January’s nonbank mortgage numbers bore out a softer rise in payrolls at 374,000 and industry estimates for December were downwardly revised to 369,200.
“With rates going up, volume could go down, and you’ve got people in forbearance. So there’ll be a need for modifications, and you can take and train a lot of resources processing new originations to handle those,” said Nate Johnson, executive vice president at SLK Global.
Modifications to many borrowers’ loan terms after forbearance are likely to be needed because, at 6.2%, the February U.S. unemployment rate remains nearly twice as high as it was pre-pandemic despite strong job gains.
There was an addition of 379,000 U.S. jobs in February, compared to just 49,000
Existing expertise in loan modifications will likely need to be supplemented with new hires because the industry hasn’t had a need to process a high volume of mods since the Great Recession.
Because mods surges have been sporadic, the typical mortgage company may not want to invest in long-term staffing for this purpose and fulfillment providers like SLK are the ones currently pursuing it. (SLK is an affiliate of Fifth Third Bank that also works with other lenders.)
In addition to SLK, there are at least two other industry fulfillment providers pursuing strategies that bridge the origination and servicing functions: Evolve Mortgage Services and SitusAMC.
Historically, the extent to which the industry works with these providers fluctuates, but it is possible that some licensed loan officers will gravitate to them if rates keep rising and positions at lenders diminish, said Michael Franco, CEO of SitusAMC.
That, combined with an expected rise in more work-intensive purchase loans, could sustain demand, potentially creating a net gain in industry jobs even if rates keep rising. But only if the strength in the inventory-constrained homebuying market is strong enough to sustain volumes.
“Whether that ends up leading to a slower increase in staffing depends on how much new origination volumes end up being impacted by a potential rising rate environment,” Franco said.
