Banks are laying off thousands of people, but it's because the economy is actually getting a little better.
Bank of America's announcement that it is laying off 1,200 people who work on mortgage refinancings was only the latest salvo. The company also said it will cut another 3,000 people who work on restructuring problem loans before the end of the year. Banks from Citibank to Wells Fargo to SunTrust are also laying off hundreds or more than a thousand workers each.
The reason: With the economy improving, not nearly as many old loans are going bad, and not nearly as many new ones are being made. Because home values have been rising in many areas fewer fewer homes underwater, so there are far fewer requests for loan modifications and extensions.
And with interest rates having risen over the spring and summer - reacting to the bond market's guess that an improving economy would lead to tighter monetary policy - fewer people are refinancing their homes.
"It's good news for the country,'' Bank of America spokesman Terry Francisco said. "The number of people who need loan modifications or short sales is smaller, and with rates higher it has significantly impacted our refi volume. As the market shrinks, we need to reduce costs.''
At Bank of America, only 398,000 mortgages are now 60 days or more past due, Francisco said, down from 1.5 million at the worst of the housing bust. Third-quarter profits from mortgage banking income dropped by $1.4 billion on lower refinancing volume, the bank said.
Citigroup has announced 1,200 mortgage-related layoffs, spokesman Mark Rodgers said. At Wells Fargo, now the nation's biggest mortgage lender, 6,400 mortgage-related layoffs have been announced since summer. Atlanta-based SunTrust said it would cut 800 workers.
"Like many financial institutions, we are adjusting our staffing to current market conditions,'' SunTrust spokesman Michael McCoy said. The cuts reflect "not only the reduced volume of mortgage loan refinancing but also our efforts to reduce delinquent loan servicing given the improving housing recovery.''
In August, about 939,000 homes in the U.S. were in some stage of the foreclosure process, 33% fewer than 1.4 million in August 2012, according to CoreLogic. That represented 2.4% of all homes with a mortgage this August, compared to 3.3% last year.
Americans took out $1.25 trillion of mortgage-refinancing loans in 2012, according to the Mortgage Bankers Association. That's expected to fall to $989 billion this year and $388 billion next year.