This year's evaporation of easy credit for home mortgages has caused a painful industry shakeout in New Jersey and Pennsylvania, according to data from state bank regulators.
In Pennsylvania, 564 branches of mortgage banks - one-third of the total - have closed this year. The number of residential mortgage bank branches in New Jersey dropped 387, a 22 percent decline.
Lawrence Lesiger, president of First Mutual Corp., a mortgage bank in Cherry Hill, said his company had survived, but shrunk dramatically.
First Mutual, in business since 1958, is likely to complete $100 million in mortgages this year, down 85 percent from $700 million in 2003.
Employment at First Mutual has plummeted to 15 from 180 in 2003, when the overall U.S. mortgage market peaked at $3.9 trillion amid a refinancing boom. This year, the U.S. mortgage market is expected to total $2 trillion to $2.25 trillion.
Mortgage banks provide mortgages directly to borrowers, unlike brokers who earn commissions for connecting borrowers with lenders.
Remaining on one's feet as a mortgage lender is an accomplishment when dozens of lenders have gone out of business and many of the largest banks in the country are writing off tens of billions of dollars to clean up the mess caused by the subprime-lending excesses of 2005 and 2006.
Today, federal officials are expected to announce an agreement with mortgage lenders, servicers and investors to freeze introductory interest rates on certain subprime mortgages for five years to fight an anticipated surge in foreclosures next year.
Instead of retrenching during this period of industry turmoil, some mortgage lenders are expanding to prepare for an eventual upturn.
"We are sort of aggressively trying to recruit proven, established loan producers. We have had some success there," said Philip L. Russo, chief executive officer of Arlington Capital Mortgage Corp., of Bensalem.
Arlington Capital opened an office in the Lehigh Valley this fall because it was able to hire a person Russo called the best salesman he ever interviewed.
It was not an easy decision, because it takes time for a new office to start making money. "I'm not going to tell you I didn't have to grit my teeth to do it," Russo said.
The industry turmoil has extended to brokers, such as Michael Kennedy in Media. Kennedy, 32, closed his company, Keystone Atlantic Mortgage Inc., and reopened shop as a branch of Dreamhouse Financial L.L.C., of Brick, N.J.
"We're in day five of my being an employee again," said Kennedy, who can offer more products through Dreamhouse.
Kennedy and others blamed the collapse of the mortgage-industry market on Wall Street, which pumped the market full of exotic mortgage products and just as quickly pulled the plug when things started deteriorating.
"They've taken a huge stream of would-be clients and cut it to a third of what it was," Kennedy said.
Lesiger, the mortgage banker in Cherry Hill, said he was worried that federal lawmakers could force changes on the mortgage market that have unforeseen consequences that restrict credit and make it even harder to stay in business.
"When you make a move, it affects three other things," he said. "You have to make sure it doesn't affect those three other things in a way that causes a catastrophe."