Mortgage mantra: It's not doom and gloom

Yes, interest rates are going up and originators are going to feel the pinch this year. But it’s not a doom-and-gloom scenario – rather, it’s a time to re-focus, work those relationships, get creative, remain purchase-driven and explore other referral sources from traditional wellsprings.

Such sentiments represented something of a common thread – think of it as something of a primer – among those attending the recent “Hall of AIME” event that took place Feb. 10-12 in Miami Beach. The event was billed as a celebration of the broker channel, lauding elite leaders and the top originators in the mortgage wholesale industry. Mortgage Professional America took the opportunity to gauge the outlook of some of those in attendance at the event.

Rami Daood, founder of Rightway Lending, said his transition from retail to wholesale yielded the needed tools to survive uncharted waters ahead.

“I came from a background in retail with one of the box retail lenders,” he said. “Retail is now, thank God, the curtains are coming down. It’s the past and wholesale is the future. I came from a background where we were selling three, four points. Now that the rates have increased, where I’m at right now with my business might be different than others just because of the fact that wherever they’ve gone up to is what I’m already used to doing when the market was great.”

For those at a disadvantage, he advised capitalizing on valuable contacts: “I think leveraging all the relationships with realtors, like maybe scheduling some time in between the day – between twelve and one o’clock is kind of what I do just to pick out which realtors we’re going to call during our lunch break and from there reach out to see what we can do to generate more purchase. Because that’s where it’s going to head towards.”

Read more: Originators – going the way of the dodo?

Chris Griffith, broker/owner at Debt Does Deals, took a philosophical turn in turning to an agrarian analogy.

“Ranchers are some of the people that you’ll find talking about the weather more than anyone else,” he said. “But the success of the rancher isn’t determined during the drought year. It’s determined during the years that precede the drought year and the preparation they put into cultivating the land and operation that they have. Much to that same impact, given the interest rate movements that we’re seeing, those that haven’t prepared are probably concerned most with that, just like borrowers, because they don’t know what else better to be prepared to do.”

Todd Bitter, branch vice president at JKS Mortgage, has long pointed brokers to realtors. He worries now about those who didn’t heed his advice. “Every time I speak at an event all the way back to years ago, I’ve always preached realtors – realtors, realtors, realtors. Right now, I’d say to those guys: You should’ve listened to me years ago.”

Yet there is hope: “But it’s never to late,” Bitter said. “There’s always going to be refis, there’s always going to be people who need cash out for whatever reason. There are still people out there that haven’t refinanced that have 5% or 6% interest rates. But the guys that are heavily dependent on it, they have to shift their focus on purchases right now. Even though it might be a little late to get in some areas to get on the bandwagon with realtors, find other ways. There’s builders, you name it, people who can refer purchase business to you.”

Jerilyn Shaw, mortgage broker at C2 Financial, says it’s time to expand the product base. “A lot of people only focus on the easy, conventional, conforming loans, VA, FHA. I do a lot of non-QM, as well. That’s a big space.”

To illustrate, she noted that of the new leads she’s generated in the past three or four days prior to attending the AIME event, six out of 10 of those were non-QM.

“That’s really a big part of my business and becoming more so,” she said. “With interest rates rising, it’s pushing some people out of qualifying now. Obviously, home prices as well. So, they don’t have the down payments, the debt ratios are higher. Payments are becoming less affordable. In the non-QM space, it’s easier to get them interest only; I could push a debt ratio higher maybe; or maybe I could do a no-doc and qualify them a different way; or qualify them with some bank statements. There are definitely a lot more ways to make a deal work. I always tell people ‘don’t think about the interest rate, it’s all about the payment. You have to focus on the payment’.”

Read next: Get ready for a huge mortgage rate hike next month

As an industry veteran, Melinda Payan, president at The Truth About Lending, has the advantage of perspective. She noted that, inevitably, the cream rises to the top in more challenging time periods.

“I’ve been an originator for 25 years, and I’ve been a broker/owner for 90% of that time,” she said. “I can tell you when the things in the market indicate that the rates are higher, that’s usually the best time for brokers to shine. Honestly, when anybody can originate a loan at 2% interest rate, that’s when really anybody can get in this business.”

Genuine practitioners of the trade will emerge amid a more mercurial climate, she said. “When you really show your expertise of how to structure a loan, how to offer non-QM products, how to offer alternative options than the normal financing, this is really the best time to do this. This is the best time to get those realtor partners, this is the best time to get that builder. Nobody is going to make a change when they’re happy with their loan officer. When they become unhappy is when those realtor relationships and other relationships open up. To me, 2022 has the most opportunities – more so than 2020 and 2021.”

Mat Grella, president and co-founder of NEXA Mortgage, echoed similar sentiments. First and foremost, brokers need to pivot their focus on the purchase market, he said.

“I think for starters, you’ve got to be purchase-driven,” he told MPA. “I think that’s where brokers do really good and differentiate themselves among bankers and retail, because we’re not re-fi chop shops; we don’t just turn and burn refis like crazy. I think focusing on the individual client experience, focusing on differentiating yourself on that aspect: Being a mortgage expert. Doing more things. Now that things have opened, you can do it in person. You can go to closings again and all that stuff like we were doing before. You can meet them face to face and do a lot more interactions. That honestly is going to be the key for brokers to continue to gain market share.”

He reiterated the need to remain purchase-driven. “Remain focused on constantly building relationships with realtors,” he said. “If it’s ten o’clock at night and you’re sitting there watching the latest episode of Yellowstone or something like that – you know, turn it off. Get to your emails. Get to responding to your clients, to your realtor partners and maintain and build those relationships. That’s what’s going to set people apart. I don’t necessarily see it as doom and gloom.”