Keep your head down.
Mortgage lenders including Wells Fargo and JPMorgan Chase that feasted on refinancings as interest rates reached all-time lows are now warning that the drop in demand may be steeper than expected.
Bloomberg News reports that even Bank of America, which fell to fourth in U.S. mortgages last year as it scaled back after buying Countrywide Financial Corp., is reducing capacity further as surging interest rates crimp demand.
The firm is eliminating 2,100 jobs and closing 16 offices by October 31st, said two people with direct knowledge of the plan.
Home lenders are tempering forecasts after interest rates rose amid signs the Federal Reserve may scale back stimulus efforts.
Wells Fargo said Monday that third-quarter originations may fall 29% to $80bn. JPMorgan, ranked No. 2, said it expects to lose money on home lending in the second half as volumes drop as much 40% from the year’s first six months.
Wells Fargo and JPMorgan reported record profits last year, aided by refinancings and a rebound in sales and prices. Now, mortgage lenders are paring staff as higher interest rates cast doubt on how much the housing market will improve.
Wells Fargo plans more than 2,300 job cuts and New York-based JPMorgan may dismiss 15,000 by 2014.
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