Record low mortgage rates in 2002 and 2003 powered huge gains in employment in the mortgage industry.  More new jobs were created in the mortgage business than any other industry in the post dot-com era with current employment at over 500,000 people.  When rates started inching up in 2004 we all thought that would come to an end but it didn&39;t happen.

In spite of the prime rate rising from 4% to 8.25%, long-term mortgage rates stayed reasonable. These rates are keyed to long-term bond rates. Analysts usually compare mortgage rates with the yield on the 10-year Treasury Bond. From mid-2003 to early 2006, the 10-year bond yield stayed roughly between 4% and 4.5%.  In early 2006 rates started to rise eventually getting over 5% in mid-year.

But then things started back down again and ended 2006 at about 4.4%.  30-year fixed rate loans were again available below 6%. In the past week, however, rates have started up again. With the Bank of England raising its rates by .25%, the U.S. Treasury 10-year bond yield this morning was over 4.7%.

This is not a good omen for employment in the mortgage business. Ameriquest closed all of its 229 branches. Washington Mutual reported large layoffs and several large firms have closed their doors. Just in my own building, one lender just reduced his processing staff by half.  I expect this to continue as the reports of mortgage applications, while highly volatile, continues well below what the industry has been used to these last few years. Bottom line: we do not need 500,000 people in this industry any more.

So why is this important to you?  A funny thing happens when someone&39;s employment is threatened: he may do desperate things, like forgetting about telling his clients the truth.  In fact, if there were an "Honesty Index," it would be taking a big dive right about now.  I already hear evidence of this from borrowers.

Borrowers always need to be especially cautious about the companies and people they deal with. That is especially true now. Do not just accept verbal statements. Get commitments and get EVERYTHING in writing.