Following the recent slump in mortgage demand,
) announced 1,000 job cuts in its mortgage business units. The
job cuts will take place primarily in Las Vegas, Nev. and Irving,
Texas. This move follows the banking major's shuttering of its
Danville office in Illinois, which resulted in service
termination of 120 employees.
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Through this move, Citigroup joins other banking giants like
Wells Fargo & Company
JPMorgan Chase & Co.
Bank of America Corporation
) that have shut down offices catering to the mortgage business.
During the financial crisis and the initial phases of economic
recovery, these banks capitalized on the low interest rates that
boosted their mortgage refinancing business. However, with the
economic revival gaining momentum, the scenario has undergone a
change. According to
, mortgage applications in the U.S. declined in the previous
week, hitting the lowest level in the past 5 years.
An increase in interest rates led to mortgage loans becoming
costlier. Further, with the overall economic improvement, the
prices of real estate properties are bound to rise. Therefore,
investors have to buy relatively costlier property with loans
that come at a higher price. Notably, since Sep 2012, a rise in
borrowing expenses has slowed down mortgage refinancing by almost
In the forthcoming quarters, the loan demand could fall lower
than what is expected. Hence, large mortgage lenders are striving
to minimize losses by adopting stringent cost-cutting measures.
Last month, Wells Fargo announced 2,300 job cuts across the U.S.
in its mortgage servicing segment.
Alongside, JPMorgan announced 19,000 job cuts by the end of 2014.
The majority of these will be in the bank's Consumer &
Community Banking segment. Additionally, Bank of America plans to
axe 2,100 jobs across its mortgage service segment, with the
shuttering of 16 offices by Oct 31.
Currently, Citigroup carries a Zacks Rank #3 (Hold).