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The city of Charlotte is the second largest financial center in America in terms of assets following New York City, and with that comes many mortgage brokers.  During the last year, banks have laid off thousands of mortgage employees, and in the Charlotte area lay-offs were in the hundreds.  Over the last five months, the Charlotte Observer has reported the loss of mortgage related jobs in three major banks.

  • SunTrust Banks said it told 19 underwriting and closing employees in Charlotte last week that their positions are being eliminated. A spokesman said the layoffs are part of an initiative, announced in October, to eliminate 800 jobs nationwide amid lower demand to refinance. The Atlanta-based bank continues to have mortgage operations in Charlotte employing roughly 60 people, the spokesman said.

  • Bank of America said last week it has cut a "small number" of mortgage jobs in the Charlotte area. A bank spokesman declined to provide an exact number.

  • Citigroup announced last month it is closing its default mortgage-servicing unit in the Fort Mill, S.C., area, affecting up to half of the 800- to 900-person workforce.

During the height of the Great Recession, interest rates hit record lows, and that allowed homeowners the opportunity to refinance at very low rates.  During the second half of 2013, the refinance boom declined as mortgage rates increased.  Banks are cutting mortgage employees, as the demand for mortgage business has declined.

This problem in Charlotte is a classic example of a supply and demand economic principle.  When the price of a product, in this case a mortgage refinance, increases, then the demand will decrease.  This is what is causing the layoffs of mortgage employees.

On the Federal Housing Finance Agency chart, you can see from the most recent data that interest rates have increased from their all time low, thus the demand for mortgage refinances is decreasing.  This classic example of increasing price and lower demand is the root cause of banks laying off workers who specialize in an area that is no longer in high demand.

So what does this mean for the NC banking industry?  Many have predicted that interest rates will stay relatively low for the remainder of 2014, yet the following year is expected to see increases.  30-year mortgage rates were around 3-3.25% in early 2013 and have increased to around 4.45% today.  By 2015 they are expected to climb to between 5% and 5.5%.  This means that there will be a lot of changes in the next two years.  If these forecasts hold true, North Carolina can expect to see more layoffs in the mortgage industry with possible other impacts across the financial industry.

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