Becca Summers does not typically include Wells Fargo on the lender recommendation list she gives to clients. However, when mortgage rates started rising in the spring, Summers encouraged her clients to take advantage of the bank’s mortgage rate lock product.

“Wells Fargo was doing a program where they would lock the rate indefinitely, so I had three of my clients transition from the builder’s lender to Wells Fargo because they were able to lock in back in March when the rates were still in the 4.0% range, versus closing on their mortgage now when their homes are finally finished being built and rates are around 7.0%,” said Summers, a Keller Williams agent in Provo, Utah.

Any time my buyers are the ones bringing a lender to the table who I am not familiar with, I am going to have some questions for that lender.

Amy Breach, Real Estate broker on the Hill Team in Seattle for Keller Williams

Looking back, Summers is glad she encouraged her buyers to swap lenders. It saved her clients a good chunk of change, but it also paid off in another, unexpected way.

“The builder’s real estate agent swapped in the middle of the transaction, so things got a bit mixed up and no one updated the clients’ files to reflect the change in lender,” Summers explained. “So, about two weeks before the closing was scheduled to take place, the builder reaches out to me and was like, ‘The loan officer on your client’s file got laid off and we are assigning a new one to it.’ At that point my client’s had been locked in their rate for months, but if we hadn’t swapped lenders their monthly mortgage payment would have skyrocketed and who knows what would have happened to the transaction.”

Successful transactions are becoming harder to come by due to lower homebuyer demand caused by rising mortgage rates, inflation and a high level of volatility in the stock market. In turn, real estate agents are doing everything they can to ensure they get their clients into their home of choice. A lot of this depends on the homebuyer’s lender.

“That partnership is everything,” Amy Breach, a Seattle-based Keller Williams agent, said. “The lender and LO can make or break the transaction.”

But some of those partnerships are getting turned on their head as the mortgage industry reckons with the housing market slowdown. In 2019, prior to the start of the COVID-19 pandemic, there were 263,494 LOs, according to mortgage data technology company InGenius. Due to the historic refinance boom and massive uptick in homebuyer demand, the number of LOs nationwide ballooned to 353,119 in 2021, but by July 15 of this year, that number had dropped back down to 276,837.

Garth Graham, senior partner and manager of merger and acquisition activities for the Stratmor Group, projects that LO headcount should decline back to 2019 totals.

“Some 80% of the volume in our industry is done by about 40% of the LOs,” Graham told HousingWire in November. “And so, the bottom 20% of volume [handled by 60% of LOs] this is the part that has not yet shown up in [the layoff] data yet.”

Trouble in partnership paradise 

Operations staff, like processors and underwriters, are completely dependent on the sales people to generate their work, so if transactions aren’t coming through it isn’t good for anyone.

Fahad Janvekar, a loan officer at Fairway Independent Mortgage

“It’s tough right now to see so many people in our industry lose their jobs,” Fahad Janvekar, an LO at Fairway Independent Mortgage, said.

Although Janvekar feels insulated from the chaos due to a 100% commission based compensation structure, he still has his concerns.

“Operations staff, like processors and underwriters, are completely dependent on the sales people to generate their work, so if transactions aren’t coming through it isn’t good for anyone,” he said. “But my outlook isn’t that I am not worried about my role right now. If my numbers drop as the market slows further or are consistently super low then I should really start to worry.”

In 2022 alone, nearly every major mortgage lender shed a significant portion of their staff. Mortgage processors, underwriters, and other support staff were generally among the first to be cut. Tens of thousands have been laid off in 2022, and with production nowhere near the heights seen in 2020 and 2021, another 150,000 industry jobs could be shed in the next year. 

For agents, who often work just as hard to cultivate a strong rapport with reliable lenders and LOs as they do with the clients in their CRM, the upheaval in the lending space can be incredibly frustrating — and it makes them wary of working with unknown LOs, lenders or startups.

“Any time my buyers are the ones bringing a lender to the table who I am not familiar with, I am going to have some questions for that lender,” Breach said. “At the end of the day, I am there to be a guide and an advocate for my buyer, so I am going to make sure that I step out and talk with those lenders in kind of an interview process and then I am going to provide that feedback to my client and let them make the decision.”

While Summers said she is always open to working with a lender the buyer brings to the transaction, she feels things always run smoother and more seamlessly when she gets to work with her preferred LO and lender.

“Last month I closed a transaction with a first time buyer, and afterward I asked him what he thought about the process. He said it was way easier than he expected and the title officer said, ‘Well you had the ‘Dream Team’ working for you,’” Summers said. “When we work together the process for my clients is beautiful, it’s smooth and easy, but that is because the lender and I work really well together and solved problems that arose before my client even knew there was a problem.”

Number one is communication for sure. Whether it is good, bad or ugly, keeping me informed is essential.

Marcia Ricchio, a re/max agent in Racine, Wisconsin

Although Summers has her personal preferred LO, she tries to make recommendations based on who’s best suited for the client.

“I have one LO who does portfolio loans that only his company does and it is a great first-time homebuyer, no money down loan,” Summers said. “And then for my buyers who maybe have credit issues, I have another lender that I work with because he is really good at walking the buyer through more difficult situations to get them to their ultimate goal of buying a house, and then I have another LO who is great with really technical transactions and makes sure every little detail is in line.”

Andrew Wilson, a Raleigh-based eXp Realty agent who just started practicing real estate two months ago, was fortunate enough to have access to a list of pre-vetted preferred lenders from his team leader, but after hitting it off with an LO not on the list, he took a chance and recommended her to some of his clients. For Wilson, the LO felt like a good fit for the clients, not because of the type of loan she specializes in, but due to her personality.

“I was working with a personal friend who was a first-time home buyer,” Wilson explained. “I had really enjoyed talking with the LO on the phone, and I just thought she and my clients would click and I was right.”

Standing out from the crowd

But what makes an LO or a lender stand out to an agent — and what motivates them to add them to their list of recommendations?

“Number one is communication for sure,” Marcia Ricchio, a Racine, Wisconsin-based RE/MAX agent, said. “Whether it is good, bad or ugly, keeping me informed is essential.”

For Anne-Marie Wurzel, a Mainframe Real Estate agent based in Orlando, Florida, the ideal standard of communication with her lender is weekly check-in calls to discuss all the transactions they have in progress.

“I should never have to wonder what is going on with my transactions, and with my preferred lenders, I never have to because we communicate about them all at least once a week,” Wurzel said.

If you see big rate differences between lenders, sometimes that is a lender trying to buy business because they are bleeding money and struggling to stay afloat, so that is another big red flag for me.

Anne-Marie Wurzel, an agent with mainframe real estate in orlando, florida

“Some of these lenders only work Monday through Friday 8 to 5 and then they are done,” Mandy Nichols, a DFW-based BrixStone Real Estate agent, said. “If you are working with one of those lenders and you need someone at night or over the weekend, you might as well kiss a lot of deals goodbye, especially earlier this year when the market was crazy.”

Nichols said one of her favorite LOs to work with has even taken calls from her while on vacation in Cancun. 

“Even if it is 9 at night, he’ll find a way to get me a pre-approval letter,” she said.

In addition to lack of communication, agents said to be wary of lenders who are offering much lower rates than the competition, as some lenders struggle to generate business thanks to lower purchase origination volume and essentially non-existent refinance volume. Agents said that these lenders may be attempting to buy business in order to keep their operation up and running. 

“If you see big rate differences between lenders, sometimes that is a lender trying to buy business because they are bleeding money and struggling to stay afloat, so that is another big red flag for me,” Wurzel said. “If the rate seems too good to be true it probably is. I mean you might close, or the lender might go bankrupt before your client reaches the closing table and that just isn’t worth the risk to me.”  

As an agent with only two years in the real estate industry, Jenny Vergos, who is based in Memphis at Marx-Bensdorf, said there was some trial and error involved in finding LOs she felt confident recommending to clients.

“Most of the buyers coming to me asking for a lender recommendation are first time homebuyers,” she said. “I had an LO who had done a good job for some personal transactions a few years ago, and I recommended her to my niece, who was a first-time buyer. My niece is very detail oriented and wanted to know everything that was going on with the transaction and I think the lender assumed my niece knew more than she did, so toward the end of the process my niece wasn’t very satisfied and was frustrated with how things had gone. So that was a bit of a learning curve for me and now I have an LO who runs educational seminars for our local Realtor organization, who I met through another client who I was helping purchase their sixth property. That LO walks clients through every step, so I typically recommend her to my first-time buyers.”

As the housing market slows, Vergos says she is glad to have found experienced and stable LOs and lenders to work with, but is wary of how the changing market conditions could impact the lenders and LOs working on her transactions.

“I definitely have been a bit worried,” Vergos said. “I have noticed much more increased activity in lenders reaching out and seeing if I had any transactions, they could help me with. It is mostly lenders I don’t know, and they seem to be really trying to drum up business. So, while none of my transactions have been impacted by layoffs or lender shutdowns, all of this made me think that things must be really bad on that side of the business.”

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