Hardin says there's no shortage of people to close loans, just loans to close
As bond yields continue to creep higher, and mortgage rates follow, the headwinds in the mortgage market continue to pick up strength.
Every downturn in the mortgage business invites the same comparison to 2008, the year the industry nearly collapsed under bad loans and a housing crash that took years to unwind.
That comparison gets thrown around loosely, often by people who did not live through both eras. One veteran broker who built his career across three different housing cycles has an interesting take on how the current market compares to 2008.
James Hardin (pictured top), president of Able Financial Inc, has run brokerages and built origination teams since the late 1990s. He said the current slowdown has been tougher on his business than the crash that defined the last one.
"In my opinion, 2008 through 2011 wasn't as bad as what's going on right now," Hardin told Mortgage Professional America. "Now there's just no business. Back then, there was business all over the place. It just took you a month to get it closed. Whereas now there's just absolutely no business and plenty of people to close your deals."
Hit by a slowing market
Hardin pointed to his own wife's production numbers to illustrate how sharply volume has fallen. Abby Hardin, who runs much of Able Financial's day-to-day originations, was closing loans at a rapid pace as recently as 2020.
"She closed $110 million in 2020, just her," he said. "She was probably 25 to 30 deals a month. She had two processors. It was just boom, boom, boom."
Hardin said that same pipeline has slowed to a fraction of its former size, even though her skill level has not changed.
"She's even only down to maybe three to five deals a month, depending on the month," he said. "It happens because you have all these people at 3% that aren't touching those. They're not moving because they don't want to get a new home and put that money down and still have a doubled payment."
A veteran broker’s perspective
Hardin said his career started in subprime lending in the early 2000s, building out a division of his own company for a lender called The CIT Group.
"I helped grow them throughout the West Coast from the Mississippi over to about $200 million a month," he said. "For back in the day, early 2000s, that was pretty huge because your average loan size was only $163,000."
That track record led other companies to hire him to scale their own operations, according to Hardin. He said his best-known turnaround came at Ascent Home Loans.
"I took a company called Ascent Home Loans from just being a broker shop taking inbound leads from mailers, with 10 people, to 1,200 LOs," he said. "We were the largest seller to Countrywide on the West Coast."
A similar arrangement followed at Loan Simple, Hardin said, where he built out the lender's executive staff and secondary operations from a much smaller base.
"I took them from 7 states to 35 states," he said. "I think I got them up to around 250 LOs, from $200 million to about $3.3 billion, which was the top year that they had."
By 2019, Hardin said the travel demands of that work no longer fit his family life, so he and his wife went back to running Able Financial directly as brokers. The timing worked in his favor for a few years, he said.
Then the rate spike in late 2022 gutted the refinance business that had carried his company through the pandemic years.
"Literally, we went from being a 65% purchase, and 35% refinance company to losing 35% to 40% of our business overnight," he said. "We started losing LOs at a rate where, going into 2023, we lost 40 LOs that didn't even renew. The next year, we lost 30. The next year, we lost 30 more."
The thin margins on today's deals, Hardin said, leave little room to absorb costly surprises. He pointed to a recent penalty tied to one of his loan officers.
"I literally just got an EPO that's going to cost me $15,000 for one of my LOs that only closes one deal every three months or so, and he doesn't have the money to repay it," he said. "I can't afford to pay back; well, I have to, and I will, but it just kind of sucks. You can't get blood from a turnip."
What keeps his company competitive despite those pressures, according to Hardin, is the pricing flexibility a small broker shop has that larger retail lenders do not.
"I literally will find the best rate for that client with the best product, where a retail lender can't do that because they're selling the margin for the company," he said. "We kind of treat ours as a true fiduciary."
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