While loan originators saw residential mortgage volumes near or above record levels for the second straight year in 2021, the first few months of 2022 have brought noticeable changes to the industry.
Rising mortgage rates shut down the refinance activity that dominated the past two years. With loan originators returning their full focus a busy purchase market, the changing economy and real estate market have left them looking ahead to new challenges.
“2020 and 2021 were a really great opportunity to serve a lot of clients and grab market share all across the country,” said Shant Banosian, an executive vice president with Guaranteed Rate and Massachusetts’ top loan originator last year. “2022 is going to have its whole set of different challenges, but we welcome the opportunity to fight through it and come out better on the other side of it.”
A Repeat of 2020
The Warren Group, publisher of Banker & Tradesman, has compiled from its proprietary loan originators module the top loan originators of calendar year 2021 in Massachusetts. The originators are ranked by number of loans, loan volume statewide, by region and by the institution with which they are most closely affiliated.
Loan originators processed $127.2 billion in residential mortgages across the state in 2021, according to The Warren Group, up from $116.7 billion in 2020 and $67.7 billion before the pandemic in 2019. Purchase activity statewide for loan originators was $40.87 billion last year, up 20.6 percent from $33.88 billion in 2020 and up 35.1 percent from $30.24 billion in 2019.
Loan originators also handled about 253,700 residential refinances in Massachusetts in 2021, up 4.2 percent from 2020. Refinances made up 75 percent of loan originators’ activity in both 2021 and 2020.
Leader Bank had seven of the top 10 bank loan originators based on number of loans in Massachusetts last year, and the lender also had six of the top seven bank loan originators by volume.
Leader Bank’s Christopher Butts, who originated the most loans in Massachusetts among bank lenders, said he ended 2020 thinking he had just gone through “a once in a lifetime”
“Lo and behold, 2021 was identical to 2020,” Butts said. “It was the exact same year on repeat, but with maybe even lower [interest] rates than the prior year and, in fact, a busier purchase market than in 2020.”
Stamina Won Realtor Referrals
Unlike typical years, 2020 and 2021 did not have seasonal slow periods in the summer or early fall, Butts said. He added that he often worked 80 to 100 hours per week.
Butts has a dedicated loan processor and brought on an assistant last year to help him with preapprovals and other tasks. While Butts said he never reached a point where he felt burnt out, his loan processor did need to adjust his work-life balance, including eliminating weekend work.
About half of Butts’ business comes from Realtor referrals, and he said Realtors often turned to him on weekends for preapprovals because they knew he would be available.
“I feel like if anything, I was gaining more referral partners because other people were just getting burnt out,” Butts said.
Going into 2020, Butts said he preferred to take loan applications over the phone, which he saw as more efficient than online applications. But as 2020 went on, he “begrudgingly” began encouraging clients to do online loan applications and now prefers the online process.
Marcus Sohn, also with Leader Bank, said working from home increased his productivity, making him available to get loans more efficiently to the processing center. Sohn, the top bank loan originator based on volume, said he had his busiest year in 2021.
“It was real easy to do my job because I love my job,” Sohn said. “Being a top producer for a long time, it was pretty incredible, and definitely with Leader Bank, they gave us the tools to be able get that done.”
Lenders Compete for Purchases in ’22
With higher rates putting an end to most refinance activity in 2022, Sohn said the purchase market has become more competitive, with more banks vying for each deal.
“It’s going to be tougher taking loans with the increased competition,” Sohn said. “I feel like there are more loan officers there now than there has ever been in my career.”
The rising rates, low housing inventory and higher home prices have combined to create other challenges as well, Sohn said. With buyers waiving contingencies, debt-to-income ratios changing and borrowers having difficulties qualifying for loans, Sohn said, he has had to work more with clients to set expectations ahead of time and explain potential pitfalls.
Sohn, who has worked in the industry for 25 years, said he is not too concerned about the year ahead, crediting Leader Bank for offering competitive rates and remaining flexible with loan requirements to help borrowers get approved in ways that might not be available at other lenders.
“It was real easy to do my job because I love my job.”
— Marcus Sohn, Leader Bank
Leader Bank’s Butts said working for a smaller bank, with its streamlined processes and access to senior leadership, has given him a competitive advantage as a loan originator. He added that the bank continues to add products and services to help buyers compete in the market, including underwritten preapprovals.
“We have other things in the works to take the next step and really try to help our buyers in a super, super competitive sellers’ market and make them stand out,” Butts said.
Guaranteed Rate also offers underwritten preapprovals through what the lender calls its PowerBid program. Banosian said this offers buyers an advantage because sellers and their agents will have more certainty around how quickly the deal can close.
Faster closings and locking in rates before buyers even start shopping for a house are other ways Guaranteed Rate is helping buyers manage the purchase market, Banosian said.
In just the last few weeks, Banosian has seen the effects of higher rates on the purchase market and the amount borrowers can afford to pay. But demand remains for the low inventory of houses in the market, Banosian said. He added that other factors will also likely keep demand for housing strong, including high costs to rent in Massachusetts, incomes that have risen year-over-year and the number of Millennials arriving at prime homebuying age.
He also sees opportunity for lenders in this market.
“Anytime there are headwinds and challenges, that’s usually when the biggest opportunity for growth is in the future,” Banosian said. “We want to make sure we’re doing a great job for our clients in helping them win and being able to answer their questions and being kind of like a beacon for them.”