Banks are cutting their mortgage servicing staffs. This could affect both shopping for new mortgages and keeping up with existing ones, but well-informed consumers can still get around the negative impact of these staff cutbacks.
According to Fitch Ratings, banks have slashed their full-time mortgage servicing staffs in half over the past two years, from 8,000 to 4,000. However, understanding the reasons for those cuts can help consumers recognize what their options are.
Bad News for a Good Reason
Staff cuts might ordinarily be seen as a sign of trouble for an industry, but in this case, Fitch attributes it to a sign of strength for mortgage lenders: improved loan performance. You see, when lenders are dealing with fewer problem mortgages, staffs are able to handle a bigger workload. For example, Fitch found that the average bank mortgage service employee was now handling more than twice the workload of their non-bank counterparts. Significantly, non-bank lenders have not made the same cuts to their servicing staffs that bank mortgage lenders have.
The improved loan performance is not entirely a product of better economic conditions in recent years. Banks have made a conscious effort to concentrate their lending on higher-quality borrowers, and this selectivity has contributed to better loan performance.
In a sense then, the service cuts are bad news for a good reason – they are occurring because fewer consumers are falling behind or defaulting on their loans. Even so, consumers should take note of what those service cuts imply, because this can affect how they shop for mortgages.
Tips for Mortgage Shoppers
Here are some things to keep in mind as you shop for a mortgage at a time when bank servicing staffs are being cut:
- Online resources are a great equalizer. Though the figures reported by Fitch focus on loan servicing rather than origination, in some cases staff cuts may be indicative of broader trends towards making fewer human contacts available to consumers. However, this is mitigated to a large degree by the access to information available over the internet. You can use online resources to shop for your loan, and when choosing a lender you might want to look at which lenders make information and services related to your loan readily available online.
- Extend your search to non-bank lenders. Since banks are cutting staff while non-bank mortgage lenders are not, this might be a good time to consider a non-bank lender when looking for your loan.
- Know the right fit for your credit rating. The Fitch numbers imply that banks have put a greater emphasis on credit quality when it comes to loan origination than non-bank lenders. That might be helpful when dealing with a bank if your credit is excellent, but it may leave you frozen out if your credit is flawed. If the latter is the case, it is another reason to look at non-bank lenders. At this time, it appears they may be more receptive to borrowers with less-than-perfect credit histories.
The most important thing for consumers to remember is that they have lots of choices when it comes to getting a mortgage, and choice is empowering – but only if you use it.