Mortgage firms feel pinch

The Chicago Tribune reports:

Ameriquest Mortgage Co.'s recent decision to slash 1,500 jobs is the start of a national shakeout in the home-loan business--one that could cost tens of thousands of workers their jobs and squeeze weaker companies out of the business, industry experts say.

As interest rates have risen, refinancings have faded and applications for loans to purchase homes have begun to decline, according to the Mortgage Bankers Association.

Many borrowers already have taken out equity from their homes through refinancings and second mortgages. If home prices level off, as many predict, these homeowners will have less equity to extract and less incentive to refinance.

Mortgage Bankers Association economist Doug Duncan said jobs would be lost as some companies pared their staffs and others were acquired or went out of business. The number of job reductions will depend on how high rates go, he said, with as many as 80,000 positions eliminated should 30-year fixed rates climb to 8.25 percent, up from 6.32 percent currently.

The boom and bust cycle in mortgage jobs.