PHOENIX -- The housing industry is supposed to making a big comeback here in Phoenix. But one of the biggest names in the home mortgage business is cutting mortgage jobs, including hundreds here in the valley.
The economy is recovering and interest rates are rising. And as a result, Wells Fargo is laying off many of those it hired to work in Tempe and tackle the rush to refinance.
Last January Wells Fargo was recruiting close to 1,000 people to work in mortgage services, primarily in Tempe. Now, with interest rates climbing, the lending giant, which employs some 12,000 people across the valley, is laying off 291 people in Tempe and one in Phoenix.
Michael Orr with the W.P. Carey Center for Real Estate Theory at ASU explains.“You've got a big pool of people of who could save some money going from 4 1/2 to 3 1/2," Orr says. "So there is a lot of writing of loans when you've got very low rates. But as they go up, that pool evaporates very quickly and the number of people buying homes is smaller than the number that could refinance. So if you are in the mortgage business, you could get fewer loans to write and that means fewer fees to charge.”
A total of 2,300 people nationwide who work for Wells Fargo in mortgage services, received their 60 day notice today.
The lending giant released this statement: “While interest rates remain very favorable by historical standards for homebuyers, a recent rise in rates has affected consumer demand for mortgage refinancing, causing volumes to fall below what we experienced in 2012 and early 2013.”
Many housing experts believe these layoffs are a symptom of our recovery and won't be the last. “We've had banks recruit whole departments to work on short sale processing and that is starting to wind down,” said Orr. “Most people who want to do a short sale have already done one.”
But Orr says it's important to remember the housing industry, and thus the financial industry surrounding it, are cyclical.
“A lot of people lose jobs in part of the industry, but jobs are created in other parts,” said Orr. “We have a shortage of construction workers, trades, electricians and plumbers.”
Still, Orr believes if banks wanted to lend more, they could. “The banks are being fairly strict underwriting for new homes and if they loosen up a bit they might get new business."