The Mortgage Market Is So Bad Lenders Want Ex-Employees to Give Back Their Bonuses

David Siegel went to work for an affiliate of Guaranteed Rate in 2021 and got a signing bonus of more than $100,000. Interest rates were super low, and mortgage bankers were raking in cash.

Now that business has dried up, the mortgage company wants its money back. He said it fired him one month shy of the date when it could no longer ask for the bonus back, then demanded the money. Guaranteed Rate and its affiliates are also telling hundreds of other former employees that they have to return their signing bonuses, people familiar with the matter said.

“It seems like they realize they aren’t making money in their mortgage business, so the way to get income is to claw back the payments,” said Siegel, who is based in New Jersey.

Guaranteed Rate wouldn’t comment on individual employees. But its general counsel, Anwar Shatat, said, “We are not going to be apologetic about exercising our legal rights to recover our money.”

The mortgage industry is notoriously boom or bust, but this bust is especially bad—and it’s only getting started. 

Unlike previous housing downturns, there’s no obvious way out. If the economy keeps chugging along, then the Federal Reserve will continue to keep rates high—which would in turn keep the housing market in the dumps. If the economy sinks, the Fed may loosen rates—but a recession wouldn’t do the housing market much good either. 

Many mortgage companies are growing desperate. They are laying off workers, merging with other lenders or exiting the business altogether.

Just a few years ago, the mortgage industry was in the middle of another extreme: a record boom. The pandemic ushered in low interest rates that prompted millions of homeowners to refinance and others to buy bigger homes. Lenders wrote trillions of dollars worth of loans and added staff at a rapid clip, often paying up to do so. But when the Fed started hiking rates last year, the industry quickly swung from feast to famine.

Interest rates are unlikely to fall back to ultralow levels any time soon—if ever. On Thursday, mortgage rates again hit their highest level since 2000. At the Mortgage Bankers Association’s annual conference this month, a mantra repeated by a few speakers was “Stay alive until ’25,’” when things might get a little better, according to attendees. 

Some former regulators and industry officials say the current period is worse than the 2008 financial crisis, when at least falling rates spurred a large refinancing wave. Because so many borrowers already locked in ultralow-rate mortgages during the pandemic, there’s no big refinancing rescue on the way. 

“I’ve been in this business 40 years and I don’t remember a correction like this,” said David Stevens, a former housing-finance regulator who now consults for the industry.

Mortgage application activity is now at its lowest level in nearly 30 years, according to the MBA.

Many lenders have already decided they can’t go it alone. Of the top 500 lenders two years ago, there are now about 435, according to Garth Graham, a senior partner at Stratmor Group, a mortgage advisory firm.

Mortgage industry employment has already declined 20% to about 337,000 people, from 420,000 in 2021, according to Bureau of Labor Statistics data compiled by the MBA, which anticipates a further 10% decline. The employment tally includes mortgage bankers, brokers and loan processors but not real-estate agents. 

Those still employed are earning less. Loan officers’ average monthly pay in September was down by more than half from three years earlier, according to financial technology company nCino. The average loan officer closed 3.45 loans last month versus 8.15 in the same month in 2020.