Online Lenders Confirm Layoffs

E*Trade, DiTech layoffs result of rising rates

September 4, 2003

By PATRICK CROWLEY

“E*Trade Mortgage recently took steps to reduce some of its headcount in Huntington Beach,” a company representative said in a statement emailed to MortgageDaily.com. “The decision to do so was based on the current status of interest rates and its impact on refinancing volumes.”

Meanwhile DiTech, an affiliate of GMAC Mortgage of Horsham, Pa., has also let employees go, spokeswoman Erica Stoddard said during a brief telephone interview Wednesday.

“Due to changes in market conditions we are assessing our staffing resources like much of the industry,” Stoddard said. She would not provide any additional details, including the number of employees laid off.

Both companies, recognized as pioneers in the e-commerce and Internet mortgage brokerage, are among the top online originators of mortgage loans. And both have grown quickly, according to information listed on the firms’ web sites.

DiTech, an aggressive television advertiser, claims to have originated $18.3 billion in loans last year, up from $13.5 billion in 2002.

E*Trade, a unit of the Internet stock-trading company E*Trade Group, said it made $5.2 billion in loans in 2001, an increase of 690% over 2000. Information for 2002 is not listed on the company’s web site.

But a spike in interest rates has slowed the mortgage business.

Rates advertised on the company’s web sites Wednesday night for 30-year-fixed rate loans were just over a 6% Annual Percentage Rate.

“The mortgage business is cyclical,” said the E*Trade representative. “When rates are low, there is a need for a larger workforce to keep up with increased volume demands, specifically in the refinancing arena.

“When rates rise, volume decreases, which in turn reduces the need for excess staff. It’s a typical supply and demand scenario. People in the mortgage industry expect this, it happens industrywide all the time as interest rates continue to rise,” the representative said.

E*Trade employs 3,546 people companywide, but the number of employees in the mortgage brokerage unit were not released. Stoddard would not say how people worked for DiTech.

Mortgage lending has been on the decline for a month.

On Wednesday, the Mortgage Bankers Association of America released its Weekly Mortgage Applications Survey for the week ending Aug. 29. The Market Composite Index of mortgage loan applications, a measure of mortgage loan applications for purchases and refinancings, fell for the fourth straight week.

The index dropped by 1.6 percent to 628.7 on a seasonally adjusted basis from 638.6 one week earlier. On an unadjusted basis, the index decreased by 2.7 percent compared with last week and was down 40.3% compared with the same week a year ago.

Patrick Crowley is a political reporter and columnist and former business writer for The Cincinnati Enquirer. Email Patrick at: pcrowley@enquirer.com