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Though mortgage rates have crept higher in recent weeks, home lenders are hopeful a fresh 25-basis-point cut in the federal funds rate by the Federal Reserve will help push housing costs lower entering 2025.
“I think that’s kind of the sentiment, that the rates should come down lower than they are today,” David Druey, Florida regional president at the Conway, Arkansas-based Centennial Bank, said in an interview. Lower rates should translate to more business, and Druey said he expects volume to increase gradually as the year progresses. “You’ll have more of a momentum shift than a dramatic swing,” he said.
According to the Mortgage Bankers Association’s most recent forecast, the dollar volume of home loan originations is likely to rise steadily in 2025, peaking at $611 billion in the third quarter. For the year, MBA expects originations to total $2.3 trillion, a 28% pickup over the full-year 2024 projection of $1.8 trillion. Originations totaled $1.5 trillion in 2023.
With trendlines pointing in a positive direction, some banks are expanding their mortgage operations. The $22.8 billion-asset Centennial has added several originators from lenders that exited the mortgage business in recent months, positioning the bank to capitalize on growth opportunities. “We have room where we can grow volume-wise,” Druey said.
John Wolverton, senior vice president of lending at the $1.4 billion-asset Armed Forces Bank in Fort Leavenworth, Kansas, said he expects to modestly increase his 21-loan-officer residential lending team. “I’ll be adding to that this year,” Wolverton said in an interview.
Earlier this month, the $24 billion-asset Provident Bank in Iselin, New Jersey, said it had hired a veteran lender, Mohamed Najam, as a senior relationship manager on its mortgage warehouse lending team. Najam had spent the previous 6 1/2 years at Flagstar.
“As we continue to expand our business, the addition of Mohamed to our team ensures that we remain well positioned to grow our portfolio, while providing customers with a best-in-class experience,” Thomas Berger, Provident’s mortgage warehouse lending team leader, said in a press release. A Provident spokesman declined further comment.
Talk of hiring in the mortgage sector, while modest, comes as a marked change from the past two years, when a sharp increase in interest rates sent the housing market into a deep tailspin and forced most lenders to make deep, painful staffing cuts. MBA statistics indicate the depth and speed of the dropoff. Originations, which topped $4.4 trillion in 2021, slid to $2.24 trillion in 2022. Employment followed suit. By Wolverton’s estimate, the number of mortgage loan officers industry-wide had dropped to 92,000 this summer, from 196,000 three years earlier.
Wolverton said his strategy for Armed Forces is to deploy a highly skilled but relatively compact team of experienced professionals capable of winning plenty of business in an expanding market and capturing market share when conditions cool. “We have no interest in becoming a megastructure,” Wolverton said. “When times get tough, we want to make sure we’re taking care of our people.”
Layoffs appear to be a distant concern for now. Armed Forces’ residential mortgage loan portfolio grew 13% in the first six months of 2024, totaling $239 million. At the same time, the bank has experienced a spike in the production of loans backed by the Department of Veterans Affairs. “We’ve done about $5 billion of VA loans over the past decade,” Wolverton said. “That number is going to skyrocket. We’re doing about $50 million of loans every single month.”
Even so, there are no plans for a major expansion. “We don’t want to grow our organization too rapidly,” Wolverton said.
Likewise Centennial. The bank is “correctly staffed,” Druey said, but he added managers walk a fine line balancing the need to avoid becoming unwieldy with the requirement for a team large enough to accommodate the demand that may come its way. “It’s never a smart business move to become so lean that if something positive happens you’re going to be scrambling for good people,” Druey said. “That’s when you’re going to have the hardest time trying to find them.”
Most lenders experienced a productive third quarter, as an earlier, 50-basis-point Fed rate cut pushed mortgage rates below 7%, sparking a spike in demand.
“The move towards 6% during the month of September was enough to stimulate some refinance activity, which increased originations earnings in the quarter,” Jeffries analyst Derek Sommers wrote Friday in a research note. Sommers, however, added activity has slowed as home loan rates inched back closer to 7%. Concerns about higher inflation called future rate cuts into question and seem to be putting a damper on the early-fall enthusiasm. The result: Higher mortgage rates combined with traditionally slower homebuying pace in winter mean some “tough sledding” may be ahead before warmer weather ushers in more favorable market conditions, according to Sommers.
“Housing inventory has improved, but the move up in mortgage rates further challenges affordability,” Sommers wrote.
