When the refi market dried up in 2022, business took a drastic turn for Thuan Nguyen, CEO of Loan Factory and the top loan originator on the Scotsman Guide for the last two years. Prior to the downturn, more than 90% of Nguyen’s business came from refinances.
Nguyen says he has originated $467 million in origination volume this year, closing 1,311 units as of the end of November. This falls well below the landmark $1 billion he reached in 2020 and 2021.
Forecasting another purchase market in 2023, Nguyen started using his proprietary software for something new – to pursue relationships with Realtors.
“I never had to work with realtors, but now I spend a lot of time working with realtors – supporting them and partnering with them,” Nguyen said in an interview with HousingWire.
He built features that cater to Realtors’ needs – such as weekly updates on the housing market, daily alerts of mortgage rates and keeping real estate agents informed of borrowers’ pre-approval status.
While Nguyen had to cut his workforce to about half this year, he plans to scale his company in 2023 by hiring 1,000 LOs and targeting the purchase market in Loan Factory’s 44 licensed states.
“I think I built a very good system – good process and good technology. But then it’s been underutilized,” Nguyen said. “If I can open it up and share that with a thousand of LOs (…) instead of having a one to one win, now I can have a 1,000 to one win doing the same thing.”
Read on for Nguyen’s new business strategies for 2023, how he plans to scale his business and prospects for the housing market.
This interview has been condensed and lightly edited for clarity.
Connie Kim: Thuan, you hit a record $2.47 billion in origination volume last year, making you the loan originator with the most origination volume for two consecutive years on the Scotsman Guide. However, with your volume mostly coming from refis, how badly has it affected your business?
Thuan Nguyen: Not good. If you look at that (Scotsman guide) number, about 94% of my business was from refinance. Right now, there’s no more refinance, so it’s a big change.
Earlier this year was much better, but now it’s not good. I close about 60 loans a month only. For sure I won’t be able to make $1 billion [in origination volume] this year. My production until the end of November is 1,311 units or $467 million. That is about one-fifth of the previous year. I don’t even know if I’ll be on top anymore.
It’s affecting everyone, but for me, it’s harder because most of my business comes from refinances.
CK: Are you doing all these productions by yourself? How is business delegated among team members?
Nguyen: I do have a team that works for me and supports me. There’s no way I can close that many transactions by myself. I cut [my team] down a lot. I have about five loan officers helping me, and I have more than 30 processors and assistants helping me.
CK: Has there been layoffs at Loan Factory as well?
Nguyen: I would say more than 100 layoffs at Loan Factory, and many of them also left voluntarily. Last year we had more than 200 employees, including LOs, processors, and assistants.
CK: With the market drastically shifting to a purchase market from refinances this year, how have you changed your business strategy, which was refi-dependant?
Nguyen: I changed my strategy a lot. In the past, I never had to work with Realtors, but now I spend a lot of time working with Realtors – supporting them and partnering with them.
Secondly, I did not recruit LOs, but now I have opened up. My company had only a few LOs, but now I want to grow full speed and focus on recruiting and supporting LOs.
My plan is to open up my platform, my resources, [and] my technology to help LOs who join me. Instead of focusing on myself, I’ll focus on recruiting LOs, training and supporting them and building a great platform so that they can make money easily. We have about two to three dozen independent LOs, but the goal is to have 1,000 LOs in 2023.
CK: The software you built for Loan Factory – Moso Software – automated a lot of the mortgage business model, whereas other lenders require loan originators to talk to borrowers. How has your software helped build relationships in a purchase mortgage-dependent market?
Nguyen: We built some features to support Realtors. For example, we have subscriptions that go out to realtors weekly. Out of the 27,000 transactions, we have about 8,000 realtors that closed transactions with us. So the system will put them into a database and email them every week with market updates.
We also have another subscription sending daily alerts to realtors because a lot of them want to know the rates today, especially when rates keep on changing so fast. We also help realtors follow up with their clients.
A lot of agents send us loan pre-approval requests. Our system would monitor and update the realtor of the process of the borrower’s application. The software helps us monitor the production, the referrals they send to us, the referrals they send to them.
We track the referrals both ways, and that would allow us to improve their relationship. We send them a report every month showing how many transactions they sent us, how many clients we sent to them, and what their status is. So, with technology, we can do a lot of things and we can scale.
We build relationships with existing clients, too. For example, whenever we have a new client, we ask them how they found out about us and then we track that. We reach out to the referral and say thank you.
For example, if our client is happy with us, he refers his friends and family to us. We track that. We know who referred a new client to us; we say thank you. We show our appreciation. And I don’t think anyone out there does this. So we focus a lot on customer service.
CK: With the mortgage origination volume expected to shrink further next year, how do you plan on managing cost-cutting when you plan on hiring more LOs?
Nguyen: We have a great system in place. Everything is pretty much automated, highly automated, so we don’t have to cut costs anymore. Actually, if we have 1,000 LOs joining, we probably have to hire more people in the support system. I don’t expect to cut more, but we expect to hire more people.
I think I built a very good system – good process and good technology. But then it’s been underutilized. If I can open it up and share that with a thousand of LOs, those LOs can use those as a tool to go out and help consumers. Instead of having a one-to-one win, now I can have a 1,000-to-one win doing the same thing.
I’ve been selling subscriptions to my software, but the LO who joins my company can use my software free of charge. When they join, they can take advantage of everything I have – from technology, process, marketing, pricing, support, and even mentorship.
CK: Retail lenders gave out hefty signing bonuses to top producing LOs during the pandemic boom. Is this something you plan on doing to recruit top producers?
Nguyen: We want to recruit high production LOs, but at the same time, I see that some LOs have a lot of potential, so I’m open to everyone. Most of the signing bonus came from retail lenders. They charge super high interest rates. I don’t think that model will last.
The bottom line is how can they (LOs) attract a lot of clients, how can they close a lot of transactions. When LOs join a company, they’ll be looking for how much they will get paid per transaction, what kind of support do I need, what kind of pricing can I provide to my clients? Those are more important than the signing bonus.
CK: In addition to hiring more LOs in 2023, are you planning office expansions like you did in 2020?
Nguyen: Actually, I already expanded so fast. Right now, we are already in 44 states. So we cover almost the entire nation. License-wise, we are almost everywhere. The next step would be having 1,000 LOs in the company – that’s how we’ll expand.
CK: There has been a lot of talk about retail LOs moving over to the wholesale channel amid the mortgage downmarket. Have you seen this trend as well?
Nguyen: Yes, for sure. Retail rates are so high, and I see that being a broker has so many advantages, especially the pricing. I think that trend will continue for sure. I don’t see any advantages to retail LOs.
In the past, many retail loan officers chose to work with lenders because they had a good process, a good system to support them. But now the broker system is improving a lot. Some brokers provide all kinds of support, or even the same level of support. So working with a mortgage broker that has a good support system, good process, [and] good pricing is way better than working for a retail lender.
CK: Who are your major wholesale partners, and what about them makes it easier for you to work with them?
Nguyen: Rocket Mortgage. We receive a lot of support from them – good pricing always, they have no early payoff penalty fee, underwriting support, no extension costs. There are a lot of perks they give us, and it’s in the contract. They have Pinnacle partners – I believe the top 15% of brokers would get better pricing.
CK: What kinds of products will gain traction in 2023?
Nguyen: I think right now, non-QMs are pretty popular. The newly released Freddie Mac’s Home Possible mortgage and Fannie Mae’s HomeReady mortgage to help first-time homebuyers and low income borrowers will become popular. Fannie Mae and Freddie Mac are helping people with low income, so I think that will become popular, as it will benefit a lot of people.
CK: Mortgage rates are expected to go down, but expected home sales numbers aren’t encouraging. Are you still hopeful about seeing an uptick in housing activity?
Nguyen: I think we are already starting to see that with rates starting to decline [as of] two, three weeks ago. I think we already hit the bottom. That’s why I feel optimistic. A lot of people can still afford and qualify. They’ve been waiting, so early next year they’ll jump into the market.
CK: With mortgage rates expected to drop to 5% levels, some LOs expect refi activity to go from homeowners who locked in rates at 7% levels. Is this in line with your expectations for next year?
Nguyen: No, because not many people took out loans at that rate. There weren’t a lot of transactions during that period, either. Plus, if their loan amount is small, what’s in it for them to refinance? So I don’t see a lot of support for that. It has to be purchase-heavy for sure next year.
CK: For those LOs that will be sticking with the industry, what strategies should they be deploying?
Nguyen: It’s all about relationships with family members, friends, [and] realtors, so focus on that and social media. There are so many loan officers, but only some will be successful. LOs will have to spend a lot of time on marketing on social media. Loan officers have to let the public know who they are and why they are good. They have to educate the public.
It takes a lot of effort, and it’s important to choose a good partner. If you don’t have a good system, good pricing, [and a] good process in place, how can you compete? It’s all about technology and pricing. Consumers got hit with high rates. They want to shop around. So if you work for a retail lender with high rates, how can you win? How can you get the customers? That’s why I say in the next year, you will see more consolidation, more retail LOs joining the broker channel.
