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Job cuts in the mortgage industry have reached West Michigan

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GRAND RAPIDS, Michigan (WOOD) — Higher interest rates are causing layoffs at some Western Michigan banks.

Grand Rapids-based Northpointe Bank confirmed last week that it had recently laid off 43 employees. Northpointe Bank President and CEO Charles Williams said severance pay was issued to all affected workers.

“As a national lender, we have been affected by, among other things, significant increases in interest rates coupled with lower mortgage lending,” Williams said.

Northpointe Bank is not alone in cutting jobs. According to the bank’s Michigan communications manager, Samantha Myers, Huntington National Bank cut approximately 140 jobs in its mortgage division last month due to “market trends.” She said the company was working to move “many” of the affected mortgage department employees to other positions within the company.

In April, Troy, Michigan-based Flagstar Bank announced it was cutting 420 jobs in its mortgage department, about 20% of the department’s total workforce. Lee Smith, president of mortgages at Flagstar Bank, said the company used layoffs and layoffs to downsize its department in the face of “unprecedented increases in interest rates and a significantly smaller mortgage market than what we experienced in 2020 and 2021.”

In a first-quarter report released the same month as the job cuts, Flagstar said mortgage rates were rising at the fastest pace this century.

“The cyclicality of today’s market is not new for us. We have been successfully navigating complex mortgage markets for many years, and while we do not yet know how this cycle will unfold, we are entering it in a stronger position than in past cycles,” Alessandro, President, Flagstar Bancorp and CEP. DiNello stated in report to investors.

The biggest job cuts are at the nation’s largest bank: JP Morgan Chase Bank. The company announced last month that it had begun laying off employees in its mortgage sector due to “cyclical changes in the mortgage market,” a company spokesman said. told Reuters. More than 1,000 employees will be affected, about half of which will move to divisions within the bank, It is reported by Bloomberg News..

HOW WE GOT HERE

Grand Valley State University economics professor Paul Eisley said the sharp decline in mortgage refinancing was to blame.

“Anyone who is going to refi is not going to be refi at a higher interest rate,” he said.

He said the US market was the best for mortgage refinancing from mid-2020 to early 2022, when 30-year mortgage rates averaged 3%, about 1% lower than the previous period. According to Iseli, in 2022, mortgage interest rates will mainly be 5.5%.

Iseli explained that it all starts with the federal funds rate, which is essentially the market rate that banks use to borrow money to lend if they don’t have enough money on deposit. Because banks borrow money for the short term, this is a lower interest rate. But in an attempt to slow down the housing market, the Federal Open Market Committee of the Federal Reserve raised the federal funds rate this year from 0.25% to 1.75%, at a cost to banks. Downward seepage effect: Higher mortgage rates for potential homebuyers and people looking to refinance.

According to CNBCdemand for refinancing last month was 75% lower than at the same time in 2021.

Higher mortgage rates and a limited supply of homes are leaving more potential first-time homebuyers less financially able to buy their own home.

According to the Grand Rapids Association of Realtors June reportKent County only had a 0.6-month supply of homes on the market, meaning that if current conditions continue and no new homes come on the market, every home available for purchase now will be gone within a few weeks.

“What we are seeing now is the strength of Grand Rapids… there is still residual demand in Kent County,” Iseli said.

But demand is starting to decline elsewhere, where fewer people are looking for homes, homes stay on the market longer, and there are fewer offers per home.

“All these things take the edge off the market a bit,” Iseli said.

ARE WE IN A RECESSION?

Iseli expects mortgages to start picking up as we get closer to next year and people are looking for a new mortgage term or looking to secure a home loan. When interest rates fall, Iseli said that you can expect a rise in demand for mortgage refinancing, especially among people who are buying at the higher interest rate we have now.

Iseli calls the housing market an economic indicator.

“The housing market has been the first to slow almost every normal recession,” he said.

When asked if we are in a recession, Iseli said that it is one of those things that you don’t know until you are in it because there is no clear definition of a recession and there are many economic factors. But he said that because of the wealth Americans have accumulated during the pandemic, he does not expect the recession now to be as severe as the 2008 Great Recession.

Iseli explained that the extra wealth has helped mitigate higher inflation, but prices are rising faster than the average person’s income, so they are burning through savings. Iseli said economists will monitor consumer spending habits to determine when we are in a recession.

On the positive side of the current economic climate, Americans can save some money by going shopping to school this fall. Isely said this is because some large businesses will be liquidating some of their inventory, which began to pile up when overdue orders finally arrived.


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