After nearly two years of trudging through a frozen housing market, the consensus among mortgage professionals is that the worst of it is over.

The Federal Reserve recently signaled plans to slash interest rates three times in 2024, shifting toward the next phase in its monetary policymaking.

“It finally seems like we are turning a corner and that’s good news after two years of the Fed’s negative perspective that we’ve heard,” Max Slyusarchuk, CEO of A&D Mortgage, said in an interview.

The spread between the 30-year fixed-rate mortgage and the 10-year Treasury yield has narrowed after sitting at over 300 basis points, compared to the historic norm of 150 bps. 

But how much will the decline in mortgage rates and a narrowing of the spreads breathe life into the dour origination landscape?

“At the end of the day if mortgage rates come down, I don’t just think that’s gonna solve the inventory problem right away,” said Ben Cohen, managing director at Guaranteed Rate.

“There’s still going to be a lag. So my concern is that rates are going to come down but inventory is not going to just all of a sudden be plentiful and now we’re in a situation where home prices get driven up because there is still low inventory. You have all these buyers that have been waiting for rates to come back and now they’re back and all this becomes really competitive again.”

Mortgage professionals say 2024 will be a ‘recovery year’ as markets slowly return to normal. But a combination of factors – high home prices, lack of inventory, elevated rates — temper expectations for even a moderately strong year. 

HousingWire interviewed a dozen loan officers and mortgage executives about their strategies for 2024, which mortgage products they expect to be in demand, and the magic rate needed to get sellers and buyers back in the market.

Strategies for 2024

I’m heavily focused on recruiting, improving technology and marketing, empowering the loan officers — by giving them the same technology and marketing support. Whatever I have for me, I will do it for them as well. This way I can help them grow their business. 

We will use AI to help with customer service. AI can understand the loan status, a loan profile and AI can respond to the consumer. If they want to know what’s going on with rates, their loan, AI can give them an answer. 

The second project I’m working on is having a mobile app where the the client can download the app and use it to take care of their transaction. We are going to shift to using a mobile app so we don’t have to use phone calls, emails and text messages anymore.

— Thuan Nguyen, CEO of Loan Factory, Inc.

A lot of what you hear is very cliche-ish. You have to make more calls, got to call on more people — all that is true.

But I think it’s more complex than that.

A successful loan officer in this market needs a very capable qualified assistant. I think they need to have all systems firing, meaning they’ve got to do the traditional stuff where you’re doing broker open houses, you’re going to open houses, you are doing coffee clutches and breakfasts and all that. 

Simultaneous to that, I think you got to be heavily engaged in what I call the ‘virtual war’ and that means you’re driving your social media and you’re in your your subscribing to systems that drive alerts to your database’s activity. And then you have to have a process in a system to manage those alerts and have outreach to those alerts to where you’re capitalizing on them in a quick time. 

— John Palmiotto, chief production officer at The Money Store

What people who don’t understand marketing have done is unintentional marketing. They’re just doing what they see everybody else doing and what we’re finding is those who are succeeding today and are going to thrive in 2024 have a lot of intention in their social media. 

It’s not social media, it’s social networking. Networking has always been a key component to drive growth and fostering true community with your referral partners and your sphere of influence. So you have to be intentional, you have to be very strategic – understanding the audience that you’re going after and leveraging it as a social networking platform. 

— Shane Kidwell, CEO of Dwell Mortgage

We’re now having to put in work every day without necessarily reaping the immediate reward. Staying disciplined to putting in the effort every single day at the absolute highest level even though we’re not going to see the immediate reward.

We’re laying the constant groundwork word doing the agent training. We’re doing it to where some of that is not reaping us rewards here. It’s that type of mindset that we have to have, because luck is hard work meeting opportunity.

— Matt Weaver, VP of mortgage sales at CrossCountry Mortgage

I recently got licensed in the state of Ohio because that’s where I’m from. I have a lot of connections in Ohio. I’m comfortable with lending there because I know I’m very familiar with the area. I think a lot of my friends and family members and circle of influence up there are going to be refinancing in the next six, 12, 18 months and I want to be licensed and ready to go when that time comes so that I can help them. 

— Justin McCrone, loan officer at Atlantic Coast Financial Services

Origination goals

I would be happy with doing $65 million to $75 million next year. I left and joined Revolution in 2023 for a couple months with no origination, I’m probably gonna hover around $50 million this year, whereas I did $100 million in 2022 at Guaranteed Rate. 

— Larry Steinway, senior vice president of mortgage lending and branch manager of Revolution Mortgage

The Mortgage Bankers Association (MBA) has a report on where they think the business is going, you have Fannie Mae on where they think the business is going. We look at all that and then we look at the size of the sales team, who we’ve recruited, what we think how much business will pick up.

I think the first quarter is going to be tough. And I think it’ll pick up once you get past the first quarter spring market and on. So we’re planning for a 20% increase.

— Jon Overfelt, director of sales and principal at American Security Mortgage Corp.

I think I’m doing marginally better than this year. We’re now looking at a declining rate environment versus the rising rate environment.  So that will allow people to be more optimistic. I would imagine we’ll be about 10 to 15% better next year than this year. 

— Robby Oakes, managing director at CIMG Residential Mortgage

Popular products 

Given the rate cycle over the past two years and the record level of available home equity that consumers are sitting on, the second mortgage market is a huge opportunity for originators to serve the cash-out and debt consolidation needs of their clients without touching their low rate first mortgage, make much needed origination income and keep the client close so they can service them again in the next cycle. Home equity is really a no-brainer today. 

Non-QM is also a huge opportunity for originators to serve the needs of their clients and make much needed origination income. Originators will be battling it out again next year for purchase and refinance volume again that fall into the standard agency, government, jumbo buckets. The rate and term and cash-out refinance market will rely on rates decreasing, but even if they move to 6% next year, the industry will struggle with refinances.

— Paul Saurbier, SVP of strategy at Spring EQ

There’s a big push for home affordability. So there’s a lot of programs out there for first-time homebuyers based on where they’re actually buying their home and what their income is. There’s incentives for those people to get into the home a little bit cheaper than who’s already been a homeowner and can’t take advantage of those programs. 

So to me, it’s still a big first-time buyer market in 2024. I’m not saying there are people that are existing but the people that are existing homeowners are only going to move if they absolutely have to move.

–Ben Cohen, managing director at Guaranteed Rate

I think for sure the non-QMs – the more flexible guideline programs are going to continue to be big, especially for people who are investors or self-employed aging populations.

Obviously for people with good credit, good income, solid assets, the 30-year fixed conventional mortgages is the most amazing program that exists for consumers because you don’t have any risk if rates go up and if rates go down you get to refinance and get a lower rate.

I don’t know if it’s national, but 30% of deals right [in my market in California] now are all-cash and so competing against all-cash is still going to be a concern for folks. So that means our job is not only to get them educated on their loan options, but also to make sure we are solid so we get fully underwritten files, making sure we do a lot of work on the front-end so we’re not missing out on deals.

— Brady Thomas, branch manager at American Pacific Mortgage

Home equity products will continue to be attractive options for homeowners looking for specific needs. Based on the goals of the homeowner, Adjustable Rate Mortgages (ARMs) may offer some flexibility. As rates start to tick down throughout 2024, traditional refinances will begin to make more financial sense, as well.

— Michael Merritt, SVP of customer care and default mortgage servicing at BOK Financial

Magic rate?

I would say 5.5%. But the issue is home prices are too high. In order to have the market return to normal, they have to come down a lot more. If rates and prices both come down, it’s easier. But this time, the price might not come down so we have to rely on the rates.

— Thuan Nguyen – CEO of Loan Factory, Inc.

When we get rates in the 5%, I think it’s gonna be fun to be in this business again because people will be willing to leave their 3% interest rate. I think we are going to see (traditional) refinancing transactions really start to kick in in the second half of 2024, 2025.

— Larry Steinway, senior vice president of mortgage lending and branch manager of Revolution Mortgage

I think if we get rates to come down into the 5% range, that’s going to help quite a bit. If people got rates of 7% and 7.5% and they can get a rate at 5%, that’s a refi boom for all of those buyers.

I think rates in the 5%-range or low 6% levels will bring buyers back to the market, but I don’t think we would get a ton of sellers until we have rates in the 4% or low 5%. Somebody who might want to move because they need an extra bedroom or want a bigger backyard won’t move if rates are still at 6% and they’re going from a rate of 3%. But they might do it if they’re getting 4.5%. 

— Brady Thomas, branch manager at American Pacific Mortgage

Business was really busy when they were in the low 6% range and the high 5% levels. If you look back earlier in the year when we had the banking crisis hit, business picked up a lot then and that’s about where rates were – in the high 5%, low 6%. I think somewhere in there, you would see a pretty good pickup. 

— Jon Overfelt, director of sales and principal at American Security Mortgage Corp.

The question people should be asking is at what rate threshold will sellers come back into the market. Given the average mortgage rate is 3.7%, and considering the pent-up deferred sales pressure is growing each day, our view is that somewhere around 5.5% will be a key threshold to attract sellers in a way that brings supply-demand parity into closer balance.

— Jack Macdowell, chief investment officer at Palisades Group

The number will be different based on the goal of the customer. If customers are looking for home improvement, debt consolidation or other spending goals, Home equity products can be positive at current rates. As rates work back towards 6%, I think you will begin to see more refinance options open up.

— Michael Merritt, SVP of customer care and default mortgage servicing at BOK Financial

Our definition of a magic number indicates the rate at which more than half of the buyers are willing to buy. We have an analytical department that analyzes the purchasing power of the U.S. in the past 40 years and they are saying it’s 6.25%. At 6.25%, a majority of people would say, ‘I’m OK to buy.’ That’s when supply and demand will equalize and your property is not going to drop or rise in value.

— Max Slyusarchuk, CEO of A&D Mortgage