Beret Kechian, loanDepot’s top producer and branch manager, is joining a slew of mortgage loan originators who are cautiously optimistic about the mortgage landscape in 2023.
Kechian – who was Scotsman Guide’s eighth top LO in 2021 – saw demand for mortgages triple after the first week of January compared to a month ago as mortgage rates declined and people adjusted to seeing rates at 6%-levels.
Combine that with the lack of inventory in New Jersey and bidding wars are back, Kechian said in an interview with HousingWire.
“Buyers seem like they can’t get a break,” Kechian said. “I really think they had about three months last year where it was a buyers market in the fourth quarter. Literally, we’re right back to being a seller’s market again.”
While his origination volume dropped by about 55% to $378 million in 2022 from the previous year, Kechian is confident he could capitalize on the purchase market by tapping into the network he’s been building with realtors over the last year.
“We feel like we picked up more market share in 2022,” Kechian said.
He is also expanding his deal parameters to the suburbs beyond Hudson County, where about 90% of deals come from condo purchases.
“It’s taken a lot more work to do a lot less volume, which is crazy to say,” Kechian said.
It’s still a volatile market for mortgages, but the goal for Kechian is to get back to the purchase mortgage sale levels in 2021, which were at about $460 million. He’s also expecting a sprinkle of refi business from borrowers who locked in rates at above 6.5% in the fourth quarter of 2022.
Read on for more about Kechian’s perspective on the housing market, business strategies for 2023, and his take on the loan level pricing adjustment (LLPA) fees.
This interview has been condensed and lightly edited for clarity.
Connie Kim: Tell us about your main market. You seem to be licensed in three states, but the majority of your sales come from New Jersey.
Beret Kechian: I’d say like, you know, probably 90 to 95% would be New Jersey, with New York and Pennsylvania making up the difference. Within New Jersey, [and] specifically Hudson County – which is a place that’s right across from New York City – [it] is very much like a big time condo market, my bread and butter.
But of course, we have a lot of clients that move out of condos once they have kids and get married. They move to the suburbs and they take us with them. So we still have a significant suburb influence, but they usually begin in Hudson County.
We have a really good niche and area where we are condo experts. We’re in an area that’s 90% condo [business], so it’s harder for lenders that don’t know this market to lend here. So more realtors in the area have started working with us. And usually, once they work with us, we hold on to them.
Kim: Looking at the 2021 numbers from Scotsman Guide, about 60% of your business came from purchase. I’m guessing your production pivoted toward purchase mortgages, but what does the number look like for 2022?
Kechian: In 2022, it was almost 90% purchase mortgages. I only did like $30 million in refis and I think they were all done at the beginning of the year. The numbers shook out to be like $378 million. That’s what we submitted to the Scotsman Guide.
Kim: What did you do differently from the refi boom years of 2020 and 2021?
Kechian: The world opened up, which allowed us to see people physically more. So we kind of just connected with more people. We feel like we picked up more market share in 2022 and made more connections, working with so many more teams than we did in 2019, 2020 and 2021. There just wasn’t enough volume to make up the difference of losing all those refis — and then there just wasn’t a lot of volume in purchase because our area dipped due to the rates increasing and the lack of inventory.
The suburbs had a significant lack of inventory, and even the urban areas, there just wasn’t a lot of deals going on. So I think our share of the deals has gone up and we’re seeing it so far.
After the first week of January, our applications went up like 300% month over month. We went from like 13 applications for the last week of December and the first week of January to getting about 40 applications every week.
While there’s still a lack of inventory, we’re seeing more deals happening. More buyers, I think, adjusted to this market and understand this is what it is. A lot of them are perfectly willing and happy to work with seven- and 10-year adjustable rate mortgages (ARMs) to keep the rates as low as possible. So the ones that are eligible for those are absolutely taking advantage.
The 2-1 temporary rate buydowns have certainly been a factor. We’ve been advising them how to use it with the sellers.
Lately, we’ve seen bidding wars come back where really good buyers are still not able to get houses. We have a lot of them looking and way more activities than in the fourth quarter.
Kim: If there are bidding wars in your market, are you expanding beyond your major market of Hudson County — especially given the inventory issue??
Kechian: Our realtors have been expanding, too. They have been telling me [that other] realtors are going to the suburbs more than they did and taking people out there. A lot of them that worked with us in Hudson County take us with them. We introduce ourselves to the realtors out there so they know we’re a tough team. A lot of times we ended up working with those realtors, which is a good thing. It’s taken a lot more work to do a lot less volume, which is crazy to say.
It doesn’t make sense to refi, even with cash-outs. [Borrowers] would never take cash out of their property right now and sacrifice the rate on your mortgage. They would take a line of credit or an equity loan or a personal loan. They are not going to sacrifice that rate by 2%, 3% to grab another property. The only refis we’ve seen are either late financing type refis or a divorce situation, [and] literally nothing else.
I do see that changing, though. There will be some refis at some point this year because now there is a group of people that locked in rates at around 6.5%, 7% in the fourth quarter of 2022. Those guys will end up refinancing at some point in 2023, and we’re all over that, keeping an eye on those people, making sure that we’re finding that perfectly to them — and making sure we can save our clients money.
Kim: When you say buyers are entering the market – are they first-time buyers or existing homeowners?
Kechian: I think that we’re seeing a pretty good split, but I think a majority of the buyers are buyers that are renting right now. So first-time buyers, and even if they’re not first-time buyers, they’re renting currently on their primary residence, or they may own an investment property. So when they’re comparing rent to buy, they’re looking decent.
We’re seeing less move-up buyers than we did before. Because even though they might be running out of space a little bit, unless they’re absolutely bursting at the seams, it’s hard to give up a 2.8% rate and trade it in for 5% or 6% and also go to a more expensive property. So I think people are kind of hanging on a little bit longer than they would have previously.
We’re not seeing a huge amount of the suburb move-up buyers because, again, unless their house is just way too small, I think a lot of people are hanging on and just kind of staying with the status quo, which is also hurting the inventory in the market.
Kim: Who does your team consist of? Are there other teams within your branch?
Kechian: Individual loan officers mostly, [and] no other teams besides mine. My team consists of, obviously me — the lead. I have a production manager who’s licensed in a lot of states. I also have four other licensed loan specialists that work on my files, and then one assistant. So six licenses total under my umbrella (team).
I’m a producing branch manager beyond just doing my own production. We have loan officers that are licensed in other states, and the branch itself is licensed in other states. As a branch we did $1.5 billion in 2021. I did about $830 million of it that year. In 2022, our branch did just under $700 million.
Kim: It’s not a secret that loanDepot laid off thousands of employees last year. I’m curious how that affected your team, your branch.
Kechian: Some of our operations people that were supporting us had to go. I had to drop a production assistant, some processors, processing assistants and closers. Because, you know, production-wise, LOs are commission-based [they weren’t affected]. We were overstaffed at that point, so you don’t really have a choice.
Kim: I want to ask you about the recent changes made by the Federal Housing Finance Agency in LLPAs. A lot of LOs have been raising concerns about hurting qualified borrowers — especially with the changes going into effect in the moving season. Do you have any concerns about the changes?
Kechian: Definitely not good. It’s going to push more people into private financing, like jumbo-type financing, even on conforming loan amounts. It’s going to push people more toward the private bank programs. Even inside a lender like us, obviously we have loans, we consult with different investors that we’re going to have to look at comparing Fannie Mae and Freddie Mac loans.
They did make some positive changes for first-time buyers that make less than the area median income, and give them a relief from LLPAs, but it just doesn’t meet enough of the crowd.
Kim: How much of an impact do you think it will have on your business?
Kechian: That’s only going to affect the very small percentage of buyers, at least in my market. We’re in a high balance loan market, [and] we do a lot more expensive properties. While we do a significant amount of Fannie Mae loans, we still have so much stuff that we don’t sell to Fannie Mae and Freddie Mac, such as ARMs.
We’ll still have plenty of options, but I think it’s going to hurt some buyers that don’t have a 20% down payment. It’s going to hurt that group, especially if they don’t have a 20% down payment and they make more than that average median income, or 120% of it.
If they make more than that, they’re going to really get hurt. Their rates are going to go up a quarter to three-eighths of a percent. So unless the market makes up for it by the rates coming down to kind of keep it equal, it’s going to be tough.
Buyers seem like they can’t get a break. I really think they had about three months last year where it was a buyers market in the fourth quarter. Literally, we’re right back to being a seller’s market again.
The inventory is more important than the rates, in my eyes. If inventory picks up and the market floods with new properties, even if rates come down, the prices will actually come down a little. They’re not going to go up, because the bigger problem is the lack of inventory and the rent prices.
Kim: It’s still a very volatile market, so it would be hard to predict this, but do you have sales goals for 2023?
Kechian: I’d love to just make sure that we do more purchase business than we did last year. I’d love to get back to the purchase business we had in 2021. I think that year, we did $460 million in purchase volume, and I would love to get close to there, considering how many more partners we have this year than we did back then, and how much more we’re out and about than we were back then.
I think you’ll see a sprinkling of refis — nothing like 2021 or 2020 — but not that much unlike 2019. I’m anticipating in our world, maybe $50 [million] to $75 million in refis this year, unless there’s a major move down. If there’s any sort of drop in rates in the third or fourth quarter, where the 30-year fixed-rate for conventional loans gets down into the low fives or something, then you’ll see even a bigger number.
I think as long as the economy is doing well, it’s bonus season right now in my area. We’re right across from New York City, so as long as people can buy their home and not be contingent on the sale, I think they’ll take their chances. Hopefully more people will do do that and those other homes that they are selling will become the inventory.
If the business is there, and there’s deals to be had, I know we’ll get our share. I feel confident saying that. I think you’re going to find a lot of top teams doing very well — and then there’ll be a lot of marginal officers that took advantage of the refi market that probably will be looking for different careers.