The year is shaping up to be the toughest in decades, he says
While others try to put a positive spin on it, Brian Edward Cooke (pictured), executive vice president of sales at Sunnyhill Financial, doesn’t sugarcoat what’s ahead in 2023 across the mortgage industry landscape.
“2023 is shaping out to be the toughest year as an originator in decades,” he told Mortgage Professional America in a recent telephone interview.
He even goes as far as to delineate the factors ahead: “Here’s just a few reasons why: Volume has declined about 50% compared to 2020/21, and yet supply/capacity exceed demand by about 30%,” Cooke said. “With rates near 7% again, refinance business is virtually non-existent and purchase volume is down 45% compared to this time last year.”
Is mortgage industry in trouble?
It doesn’t get better by year’s end either, Cooke added: “By the end of the year, it’s likely another 30% will likely cease or merge operations,” he said. “Mortgage has always been a boom or bust industry and we are in the midst of one of the greatest reset cycles ever.”
It’s not just conjecture either: “The FHFA’s [Federal Housing Finance Agency] recent update to loan-level pricing adjustments will require much more scrutiny by originators on qualifying prospective borrowers,” Cooke added. “Implementation of additional FICO score pricing brackets, and a pricing hit for debt-to-income ratio means more credit rescores and utilizing additional income (e.g. bonus, overtime, adding a co-borrower) will be required to deliver best price to the consumer.”
Why are interest rates rising?
And let’s not get started on interest rates, he added: “No-one can control interest rates, and guidelines will constantly change. This is what you sign up for when you become a licensed originator. More than ever, the differentiator between whether one will succeed or fail this year is one’s mindset.”
Therein lies to key to success, he suggested: “Mindset is everything,” Cooke said. “Regardless of the market, or direction of interest rates, staying consistent with daily habits and continuing to do what’s best for the borrower will win you business.”
Cooke offered further advice in light of the softened housing market: “Originators must develop a ‘do whatever it takes mentality’ to win this ultra-competitive market,” he said. “The most determined will emerge victorious.”
To succeed in such volatile times, some pivoting may be in the offing: “You may need to spend twice as much time with the client as before on qualifying for the best program or pricing,” Cooke said. “But you must do whatever it takes because, if you don’t, someone else will.”
Housing affordability will continue as a factor this year, he added: “With rates at 7%, affordability is a concern for many buyers, especially first-timers,” Cooke said. “Taking the time to educate buyers about the state of the market and thoroughly explaining their options is more important than ever.”
Given the state of the market, it might be time to be creative. “The seller-paid temporary rate buy-down loan program has gained steam industry-wide in recent months,” Cooke noted. “It’s been a great program to help buyers withstand the spikes in interest rates and spur demand on the buying side, which would have otherwise led to further declines in home prices. Additionally, our lender-paid temporary rate buy-down option has been even more popular with many of my clients.”
And yet, this too shall pass: “As most economists have predicted, rates will eventually fall as inflation declines,” Cooke said. “How fast that descent may happen, or how high rates may go, is unknown. Regardless of the direction of rates, learning to focus time and energy on things within your control will make you a better originator.”
This year, he added, will serve as something of a litmus test: “2023 will be the greatest test and challenge many originators have faced in years,” he said. “However, as the famous Mark Cuban says: ‘If you outwork everybody, if you try to be a little smarter than everybody, if you try to be a better salesperson than everybody, if you try to be better prepared than everybody, you got your best chance. Because if you don’t do it and somebody else does, work like someone is trying to take it all away from you.’”
A billion-dollar producer, Cooke knows from where he speaks. In 2021, he was ranked 17th among brokers nationwide, 6th in 2020, and ninth in 2019. He boasts that he was the “most efficient mortgage broker in America, highest producing solo-originator.”