Rising interest rates are already dampening mortgage activity… And the big banks are getting gloomy…

This week, Wells Fargo, the nation's largest mortgage lender, said third-quarter home loan originations could fall 29%. JPMorgan, the No. 2 lender, said it expects to lose money on mortgages in the second half of the year as volumes could drop as much as 40%.

Wells plans to cut 2,300 jobs. JPMorgan could cut 15,000 by 2014.

Bank of America, the fourth-largest lender last year, is cutting 2,100 staff from its mortgage department and will close 16 offices by October 31.

 The biggest reason for worry is the massive drop in refinancing activity since the Federal Reserve warned it may taper its bond purchases in May. Refinancings have dropped in 16 of the last 18 weeks… Activity has fallen 70%-plus since May. It's the lowest level of refinancing activity since June 2009 and the lowest total mortgage activity since October 2008, according to financial blog Zero Hedge.