The following article is brought to you by Jonathan Horn & Lily Leung at UTSanDiego.Com
JPMorgan Chase said Thursday it plans to lay off 730 San Diego workers from its loan-servicing business as home refinances and foreclosures dry up.
The local layoffs, to be completed by 2014, are part of a national plan announced six months ago by JPMorgan Chase to cut 15,000 jobs from its division that manages and receives borrowers’ mortgage payments. The layoff is the largest workforce reduction in San Diego County so far through 2013.
The announcement comes at a time when the housing market is improving, foreclosures are plummeting and mortgage refinancing is waning.
Like other banks, JPMorgan Chase significantly ramped up loan servicing during the economic downturn to address an unprecedented onslaught of clients defaulting on their mortgages. It inherited the San Diego operation in 2008 – the middle of the Great Recession – after acquiring Washington Mutual. The need for mortgage services continued to rise as an increasing number of consumers refinanced their home loans to take advantage of record-low mortgage rates.
Related: Foreclosures hit lowest level since ’06
But mortgage delinquencies have since plummeted due to an improving housing market, resulting in a smaller foreclosure inventory and a diminishing need for loan servicing, said bank spokeswoman Suzanne Ryan. Also, applications for refinancing have fallen sharply from a year ago in light of creeping mortgage rates. Ryan said JPMorgan Chase has 700 job openings in California and would be working to reassign some employees.
“We are responding to our customers’ changing needs,” Ryan said. “Fewer homeowners are struggling with their mortgages and many people have already refinanced, taking advantage of the stronger economy and historically low rates. We will work with affected employees to find openings at Chase or other local companies.”
San Diego County foreclosures are down about 92 percent from the height of the distress market in 2008. Refinancing applications have declined almost 60 percent year-over-year, show nationwide numbers from the Mortgage Bankers Association.
“It’s now a harder business to break into when the (refinancing) volume has dropped off,” said Todd Pianin, president and founder of local boutique mortgage company Samuel Scott Financial Group.
Related: Home prices hit a 5½-year high
While layoffs are never good news, they signal a market shift from recasting mortgages to more of a purchase-mortgage market. Rising prices have helped push homebuyers away from the fence and into the market. The median price for all San Diego County homes sold in June reached $416,500, a 5-1/2 year high.
“It’s just a sign of the cycle changing,” Pianin added.
JPMorgan will eventually close its entire office at 10790 Rancho Bernardo Road. The cuts will begin in 90 days, but some employees could be retained for up to a year. Layoffs will be complete by 2014. The bank held an employee meeting inside its shaded parking garage around noon on Thursday.
The move will take a chunk out of San Diego County’s credit intermediaries and related activities sector, which are businesses that take deposits and make loans, said Lynn Reaser, chief economist at Point Loma Nazarene University. In June the sector employed 20,000 people. That’s 500 more than the field employed in June 2012, but down from the 25,100 who worked in the industry in June 2007, the last summer before the Great Recession, the Employment Development Department reports.
JPMorgan is the latest bank to cut back on its mortgage-servicing function. Wells Fargo and Bank of America are among financial institutions that also recently announced reductions across the country. In Bank of America’s most recent earnings call, chief financial officer Bruce Thompson said mortgage servicing revenues declined $175 million, as the portfolio dropped 17 percent.
Alan Gin, economist at the University of San Diego, said the news isn’t surprising, given the recovery of the housing market.
“There is basically less need for the service now,” he said. “Prices are rising, we’ve got a combination of job growth and the unemployment rate coming down. Interest rates still really low and there’s a lack of supply on the market.”
Ryan, of JPMorgan Chase, said the mortgage business would be consolidated into fewer, larger locations. JPMorgan has 20,000 employees in California, and 11,000 in Southern California.
(CHASEHOMEFINANCESUX RESPONSE: Big Banks Have Found That It’s Not As Easy To Just Steal Money And/Or Homes From Families Like It Use To Be, So Their Going Back To Credit Cards And Other Ways Of Stealing From The American People. SAVE THE COUNTRY AND BREAK UP THESE BIG BANKS NOW!!!!)