NEW YORK — U.S. banks that have been earning record profits from home loans are adding or transferring thousands of staffers to catch up with demand for refinancing after shortages blocked homeowners from getting lower rates.
Employment tied to mortgages has risen 9 percent this year through September to 285,000, the most since 2008, according to the Bureau of Labor Statistics, as lenders responded to Federal Reserve efforts to push down borrowing costs, President Barack Obama loosened requirements, and housing recovered from a six- year slump. Even as banks added staff, they failed to keep pace, and kept mortgage rates "much higher" than they should be to curb demand, said Vipul Jain, an analyst at Morgan Stanley.
Those constraints are lifting after banks built up units to handle the highest level of refinancing since 2009. JPMorgan Chase, the biggest U.S. bank by assets, has transferred 3,500 people from servicing to mortgage originations and Wells Fargo has expanded its operations staff by at least 25 percent this year. The hiring comes before a potential acceleration in volume after President Obama's re-election saw debt yields tumble and increased the possibility of expanded programs to help homeowners improve rates.
"The trend in head count is upward," Jain said. "During the next three to six months, we're expecting a 10 percent increase in capacity."
Banks are adding home loan staff after the top five companies reported a record $8.35 billion in income from mortgage banking during the third quarter, according to newsletter Inside Mortgage Finance. In contrast, the six largest U.S. banks have reduced head count by more than 25,000 in the 12 months ended in September, as regulators demand more capital and global growth slows, according to data compiled by Bloomberg.
Lenders profited as the Fed encouraged refinancing by purchasing mortgage bonds to push down borrowing costs to record lows, known as quantitative easing, or QE. While 30-year rates are 3.34 percent, down from 5.05 percent in February 2011, they could be lower based on bond prices, according to data compiled by Bloomberg.
At JPMorgan, the biggest U.S. bank by assets, mortgage production margins are "very high" at "well over" 2 percent, up from less than 1 percent historically, chief executive officer Jamie Dimon said in an Oct. 12 conference call about its record $5.7 billion in quarterly earnings.
"Since lenders can't meet the demand, they raise mortgage rates to temper it," Jain said.
The time it takes banks to close on loans also indicates the industry's failures. Mortgage refinancings completed in October took an average of 57 days, up from 47 days in June and 42 days a year earlier, according to data compiled by Ellie Mae, based in Pleasanton, Calif.
To keep up with mounting application volumes, Wells Fargo has added about 7,000 full-time employees that process, close and underwrite mortgage loans since the second quarter of 2011, Michael Heid, president of Wells Fargo's home loan unit, said this month at a presentation in Boston that showed its hiring.
After adding more than 2,500 people to underwrite loans this year, more than half from outside of the company, the bank is hiring to fill more than 1,000 open underwriting positions, said Tom Goyda, a Wells Fargo spokesman.
The bank made or bought the largest number of home loans originated in the first nine months of 2012, with 30.3 percent of the market, according to Inside Mortgage Finance.