In June, we’re going deeper on mortgage and title — looking at where the market is headed, how products are evolving and the alternative financing options changing the game. Join us for Mortgage and Alternative Financing Month, and subscribe to Inman’s Extra Credit for weekly updates all year long.
Editor’s note: This story was updated on Friday, June 3, 2022
The rapid runup in mortgage rates this year has created uncertainty for many real estate companies, with some already laying off workers as economists revise their forecasts for home sales this year and next.
With a few exceptions — such as Homie, REX Real Estate and Side — the layoffs have largely been confined to companies providing mortgages and mortgage-related services, such as title, closing and technology.
The end-of-stimulus measures that brought interest rates to historic lows during the pandemic, has brought the profitable mortgage refinancing boom to a screeching halt, with Fannie Mae economists projecting mortgage originations will drop by 40 percent this year.
But even as some companies that provide mortgages, title insurance and closing services “right size” to the new expectations, the job market remains strong. At 3.6 percent in April, unemployment is below historic trends, and with the government reporting 11.4 million job openings, many employers are still having a hard time filling openings.
Here’s a roundup of some of the companies that have laid off workers, scaled back hiring, or offered buyouts to employees to downsize in recent months.
An end-to-end provider of mortgage financing, real estate brokerage services, and title and closing services, Better Holdco Inc. founder and CEO Vishal Garg made international news in December when he laid off 900 employees over a Zoom call. After the departure of senior executives including Christian Wallace, the head of Better’s real estate brokerage subsidiary, Better Real Estate LLC, Better shed another 3,000 workers in March.
Mortgage tech provider and title insurer Blend Labs Inc. announced in April that it would lay off 200 employees, or roughly 10 percent of its workforce, as rising mortgage rates curtailed refinancings. Before going public last year, Blend paid $422 million to acquire a national title insurance and settlement services provider, Title365, from Mr. Cooper Group. The deal helped Blend boost 2021 revenue by 144 percent, but it also helped drive a 129 percent increase in operating expenses.
Digital title insurance, escrow and closing provider Doma announced in May that it would let 310 employees go — about 15 percent of its workforce — after rising mortgage rates cooled its customers’ mortgage originations. CEO Max Simkoff said Doma was cutting costs so it could continue adapt technology it pioneered to provide “instant underwriting” of title insurance for mortgage refinancings, so that it can be used to underwrite title insurance on more complex purchase loans.
Guaranteed Rate — known to many real estate agents for its joint ventures with franchising giant Realogy Holdings Corp. and national brokerage firms @properties and Compass — made a big move in early 2021, acquiring Stearns Holdings LLC “with the ultimate goal of becoming the nation’s number one lender.” In January, Guaranteed Rate pared down its ambitions, laying off 348 employees and closing down its third-party wholesale channel, Stearns Wholesale Lending.
Utah-based flat-fee brokerage Homie laid off 119 employees in February, about a third of its workforce, saying limited housing inventory had “created a challenging real estate market for home buyers.”
Real estate franchise giant Keller Williams laid off 150 recent recruits from its lending arm, Keller Mortgage, in October, and handed out more pink slips at the end of May as part of a restructuring of the company’s operations and support groups. Even as it laid workers off, Keller Mortgage said it was committed to long-term growth, and was advertising openings for loan officers to work remotely from anywhere in the U.S.
One year after hiring Goldman Sachs to take the company public at a proposed valuation of $2 billion, Power Buyer Knock announced layoffs affecting 115 employees in March, or about 46 percent of its workforce. Having stepped away from plans for IPO and closing a smaller $220 million funding round with private investors, Knock said downsizing would allow it to continue with plans to expand into 90 markets by the end of the year.
In reporting a $91.3 million first quarter loss, LoanDepot CFO Patrick Flanagan warned in March that “headcount reductions” are part of plans to “aggressively” manage costs to return to profitability by the end of the year. “Results from the first quarter reflect an environment that may turn out to be one of the most challenging that our industry has ever experienced,” LoanDepot founder and Executive Chairman Anthony Hsieh said on a call with investment analysts.
Rising mortgage rates are making what has traditionally been Mr. Cooper’s main business — collecting mortgage payments from nearly 4 million borrowers — much more profitable. But they’re also limiting the company’s ability to originate new mortgages, prompting the company to lay off 250 workers during the first quarter of 2022, and another 420 workers during the second quarter. At the end of 2021, Mr. Cooper had 8,200 employees, so the 670 announced layoffs to date mean the company has downsized by at least 8 percent since then.
The nation’s second biggest mortgage lender, Pennymac laid off 236 workers from six locations in California in May, citing falling demand for home loans. Pennymac employed 7,208 workers worldwide at the end of last year.
Real estate brokerage Redfin’s bid to expand its presence in mortgage lending by acquiring San Francisco-based Bay Equity Home Loans for $135 million also meant pink slips for 121 existing workers in sales support, capital markets and operations at Redfin’s existing mortgage business.
REX Real Estate
After implementing two rounds of layoffs last year, discount brokerage REX Real Estate shuttered two offices in Texas in May. Although reports suggested that REX Real Estate had shed all of its agents and was preparing to shut down, REX co-founder and COO Lynley Sides told Real Trends that the company has pivoted to brokering deals for institutional landlords in California and Florida.
Rocket Companies Inc.
In a bid to avoid layoffs, the nation’s biggest mortgage lender, Rocket Companies Inc., made buyout offers in April to approximately 2,000 workers. If accepted, the buyouts are expected to save Rocket about $180 million per year, executives said on a first quarter earnings call in May.
Saying it expanded faster than it could train, support and develop recent hires, real estate technology startup Side notified about 10 percent of its employees on June 1 that they were out of a job. Side, which provides branding and technology to independent brokerages and often serves as the broker of record for high-performing agent teams, said last summer that it was on track to go public after achieving unicorn status and raising more than $250 million in funding.
A mortgage fintech launched by former Zillow executives with an exclusive focus on purchase loans, Tomo cut its workforce by nearly one-third on May 31. Citing a “recent shift in the mortgage and venture capital markets due to the rapid increase in interest rates,” CEO Greg Schwartz said Tomo was postponing, for now, plans to expand into additional markets.
Wells Fargo, which has seen its mortgage production fade as it closes retail branches, laid off an unspecified number of workers in its home lending division in April, as a “result of cyclical changes in the broader home lending environment,” the company told Inman. In reporting first quarter earnings, Wells Fargo executives said they planned to cut expenses with revenue from home lending down 33 percent from a year ago, to $1.49 billion.
Get Inman’s Extra Credit Newsletter delivered right to your inbox. A weekly roundup of all the biggest news in the world of mortgages and closings delivered every Wednesday. Click here to subscribe.