Citigroup Inc. (C:US), the fifth-biggest U.S. mortgage originator last year, shut an office in Illinois and is eliminating jobs as rising mortgage rates drive off borrowers.
The bank recently closed its Danville facility as refinancings dropped and dismissed 120 people, Mark Rodgers, a company spokesman, said in e-mailed statements. The lender also cut some telephone sales agents, he said. Fox Business Network reported earlier today that job cuts may total 2,200.
Citigroup joins Wells Fargo & Co. (WFC:US) and Bank of America Corp. in reducing home-lending staff. A surge in borrowing costs slowed refinancing by more than 70 percent since September 2012 and curbed what had been record profits.
Mortgage applications in the U.S. plunged last week to the lowest in almost five years, according to the Washington-based Mortgage Bankers Association. The average rate on a 30-year fixed loan climbed to 4.8 percent, matching the highest level since April 2011, spurred by speculation that the Federal Reserve will back away from policies intended to keep borrowing costs down.
Citigroup announced the closing of the Danville site on July 15, about 18 months after it opened, Rodgers said. Employees got severance and transition support, he said.
“The Danville facility was originally established to handle the surge in demand for refinancing,” Rodgers said. “However, due to the ongoing decline in refinance volumes, the excess capacity Danville provided is no longer needed.”
The share of applicants seeking to refinance declined to 57 percent, the lowest since April 2010, from 61.3 percent, the Mortgage Bankers Association report showed.
Lenders have hailed their ability to hire and fire mortgage staff quickly as one way to handle the cycles of the business. Wells Fargo Chief Financial Officer Tim Sloan said this week it would take about one to two quarters for the lender to adjust to the slowdown in demand.
Bank of America is eliminating 2,100 jobs and closing 16 offices by Oct. 31, two people with direct knowledge of the plan said earlier this week. Wells Fargo last month said it will cut 2,300 jobs in mortgage production.
Citigroup Chief Executive Officer Michael Corbat, who took over less than a year ago, announced plans in December to cut more than 11,000 jobs and scale back operations in some emerging markets. The bank employed about 253,000 people at midyear, down from 259,000 at the end of December, according to the company’s website.
Rodgers declined to comment on whether the mortgage cuts were part of the earlier announcement.
“Although the housing market is gaining strength, the lower volume of mortgage refinancing will impact our consumer business,” Corbat, 53, said July 15. “We’re already taking steps to make sure the mortgage business is sized correctly.”
The bank handed out $65 billion of mortgages last year, or about 3.4 percent of the total market, according to Inside Mortgage Finance, a trade publication.
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