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Last year may have started off with a bang for many Massachusetts loan originators, but the sprint rapidly slowed to a jog, and then a slog, as rising interest rates upended the residential mortgage market.

To make it through and stay on top, 2022’s top loan originators say they had to work harder than ever to close fewer purchase mortgages statewide than any year since 2015.

Buyers kicked off the year with the same fervor they showed in 2020 and 2021, eager – if not desperate – to land a house in one of the most competitive housing markets most had ever seen.

“My first sizable deal, I had someone offer $500,000 over asking and I thought, ‘Ok that’s how this year is going to go,’” said Christopher Butts, a loan originator at Leader Bank and one of the state’s top-producing LOs last year according to The Warren Group, publisher of Banker & Tradesman.

The Warren Group compiled the top loan originators of calendar year 2022 in Massachusetts from its proprietary loan originators module. The originators have been ranked by number of loans, loan volume statewide, by region and by the institution with which they are most closely affiliated.

“In the spring it was all about helping our candidates get their offers accepted in one of the most competitive markets in history. In the fall it was all about creating affordability for our clients,” said Guaranteed Rate’s Shant Banosian, the state’s most prolific loan originator by volume and number of loans.

The switch was sudden, as the Federal Reserve began aggressively increasing its benchmark interest rate in April from near zero to over 4 percent by the time the year ended.

Who were the top loan originators of 2023? See our rankings.

The average rate on a 30-year, fixed rate loan rose like a rocket, from 3.76 percent in mid-March to a spring peak of 5.81 percent in mid-June, according to Freddie Mac, before shooting up again to 7.08 percent by the end of October.

“I specifically remember the turning point was very weird,” said Keith Hapenney, another top LO and loan originator at Leader Bank.

A popular loan product dubbed “Lock, Shop and Drop,” designed to let a prospective homebuyer lock a rate before starting to shop for a home turned into a loss-maker as the Federal Funds Rate rose by leaps and bounds.

“What was meant to be a product that brought people in ended up us getting our asses handed to us on the portfolio side,” Hapenney said.

Interest Rates Force Step-Change

Suddenly, LOs had to throw their operations into a different gear.

The decline in business meant that, statewide, residential purchase mortgage volumes fell off 13.34 percent for all of 2022, while residential refinance volumes dropped 35.91 percent, according to The Warren Group.

But the rise in home prices last year might mask the dramatic drop in business many LOs reported. Across Massachusetts, 17.9 percent fewer residential purchase loans were made, and 52.87 percent fewer refis.

Different LOs took different approaches to meeting this new challenge. For Banosian, it meant staying in frequent contact with the Realtors he works with on Zoom classes, in-person meetings and making social media videos to help keep them up to speed with what was helping buyers qualify for loans, and what wasn’t.

“I’d never spent more time in real estate offices and with clients [in-person] in the last six months of the year, even though we were doing less business,” he said.

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Loan volumes were markedly down across the industry last year, and LOs had to work harder to close the deals that still remained. iStock illustration

Being a “beacon of communication” worked out well for Banosian and his team, he said, and let them find new relationships with Realtors and take market share.

Hapenney, too, hopped on the phone – but for a different reason. With a business built largely on referrals and repeat clients, “I had to grow.”

“Instead of pulling the covers over me and hiding waiting for the phone to ring, I had to figure it out,” he said.

He hired a business development assistant to help him ring up Realtors across the state who Hapenney had never worked with before, some of whom hadn’t necessarily even heard of Leader Bank, either.

“Clearly the number of swings [at bat] I was getting weren’t enough,” he said.

The two of them also worked with jam-packed schedules to follow up with customers who had bought houses with loans he’d originated, as well, to make sure their experience was a good one and root out any problems they might have encountered.

“It might be the difference between calling you back for a refinance or not or telling their friends and family about you,” Hapenney said.

Putting in the Extra Hours

And with customers who were struggling to stay in the market as prices and rates went up, Butts found himself spending a lot more time helping buyers understand their options and what might – or might not – work.

“A lot of people were stretching to afford a home because prices were so high. They wanted to do an ARM because it would bring a price down to what they wanted,” he said.

But behind their attractive interest rates, these adjustable-rate loans were more complex than many hopeful buyers realized. Uncertainty about the economy’s future meant Leader and other lenders had to make sure buyers would still be able to afford a higher interest rate when their loans repriced in a few years. That, and other complexities, meant Butts put in the effort to create a frequently asked questions document for any customer inquiring about ARMs.

“The bank has to assume a worst case for you,” he said. “It’s a bummer.”

Butts, Banosian and Hapenney each said they often had to take extra time to chart out additional options for buyers that might open up an avenue to affording a home, and educating buyers about the pitfalls of each.

James Sanna

Taking extra time, Hapenney said, also winds up ultimately burnishing his reputation with Realtors, who appreciate that it also lets him uncover or resolve issues that might cause a delay in loan approval once the buyer is trying to close on a home

“I’m not the pushy sales guy. There were some conversations that ended with, ‘Well, maybe you’re not ready to buy a house’ and it became a financial planning session instead,” Hapenney said. “It falls into doing the right thing instead of going for a sale, and I think customers appreciated it.”

By the end of 2022, Butts said, it was clear that the nature of the loan originator’s job had changed. And, with many of today’s buyers moving into homes holding mortgages with rates in the upper 6 percent range, maintaining relationships will open up opportunities for refinance relationships down the road.

“We’re in a world where it’s not like order-taking any more,” Butts said. “There’s a lot more education, there’s a lot more coaching.”

LOs in a Whole New World

by James Sanna time to read: 5 min