In 2013, Thuan Nguyen was working out of his chaotic office in the heart of Silicon Valley. You’d find him there from 5 a.m. to 11 p.m. At that point, Loan Factory had about 200 loans and just 13 employees. They hustled, too.
“The office was like a market,” Nguyen recalled. “It was so noisy, stuff was everywhere. We couldn’t keep track of things. It was crazy. And now we have 20 times the volume, and people have a peaceful life. And it’s because of the software, because of the technology. Quicken Loans, see how big they are? How much volume they can push through so quickly? I think it’s all because of the technology. They prepared for it.”
Nguyen, who emigrated from Vietnam to the United States and fell into the mortgage business about 14 years ago after leaving an unsatisfying career in finance, has capitalized on the historic mortgage boom like few others. Though plenty of loan originators and brokerage executives are stuffing their pockets with cash, his approach is rare – he personally develops his own software and sells it to other brokerages.
Nguyen, who claims to be on track to personally originate $1.5 billion in volume this year, is in full expansion mode. His West Coast-centric operation is moving through the Gulf into Texas, Florida and following the Stream into Edison, New Jersey, a community with a fast-growing South Asian population. It’s part of his business thesis – investing in upwardly mobile communities where homeownership is a cultural value. He now has 12 offices, and he plans to open 10 additional offices by the end of 2021.
HousingWire caught up with Nguyen to talk about the up-and-downs of brokerage, clearing $1 billion in originations this year, the IPO craze, how to transition from a refi market to purchase market, and developing bespoke technology for brokers.
HousingWire: Hi Thuan, thanks for speaking with me today. The reason we’re talking today is, what else – money. A few weeks back, we highlighted Shant Banosian clearing $1 billion in originations already this year. I hear you’re also a member of this club?
Thuan Nguyen: Yes. I broke that billion-dollar threshold, I think a few days before him.
HW: Congrats, that is quite an accomplishment. Can you start off by walking me through Loan Factory’s business as a brokerage? How did you get started?
Thuan Nguyen: I started 14 years ago after I quit my finance job and studied online to be a broker. I had no experience, I had nothing! And I didn’t do well for the whole year, so I shut down the business and went back to work for a startup software company. And in that time I still did some mortgage brokerage work on the side. Eventually I was able to grow the side business and quit my full-time job. When I started, I didn’t have any mentor, anyone to help me. That was probably good for me because it forced me to do things my own way, to improve. If I had learned from someone else and I stuck with their way of doing business, I could not be where I am now.
HW: What’s different about Loan Factory than another brokerage?
Thuan Nguyen: I am a mortgage broker, but unlike other brokers we build our own software. In terms of production, three years ago, my production was only $128 million. Last year, it was $507 million. And this year, I am at $1.2 billion already. And that is my own production. Company-wide production is about $2.2 billion year-to-date.
HW: Could you talk more about building your own software? Most firms outsource that kind of work or have white-label. What is this software?
Thuan Nguyen: It’s Moso Software. Traditionally, the originator has to talk to the borrower a lot to get them to fill out the application, to answer any questions, check rates with them and all that. But for my business model we automate as much as possible. So we changed the model, we changed the way we do business so that we can handle a lot more customers.
We make everything transparent for the borrower. We have our pricing available on the website so the consumer can go to our website and check the date themselves and they can see the rate, the cost and everything within 30 seconds. So, we get everything available for them to do research. And if they like it they fill out the application. If they don’t like it, they just go away. We never buy leads, we don’t call customers, we don’t cold call. If the consumer likes us and then they spread the word, more people come and they check the rate online and that’s it. That’s how we get customers.
HW: How do they find you though? How do the customers get to Loan Factory?
Thuan Nguyen: First is consumer direct marketing. So, Google ads, Facebook ads, TV, radio, etc. Secondly, we have very good service and pricing that customers are spreading the word with their family and friends. And that’s why most of our customers are referral and return customers. About 70% of our customers year-to-date are returning customers.
HW: Consumer direct is expensive though, right?
Thuan Nguyen: Yeah, but I can afford it. It’s worth it. People don’t realize the value of the customer. The customer’s worth a lot more than a single transaction. The customer will refer you to more customers in the future. My model depends mostly on that value. And that’s why value per customer is a lot higher and that makes sense to spend money on acquisition even though it’s expensive.
HW: How do you know when the customer should refinance? Do you proactively tell them? Do you say, “James, you got a mortgage with me in 2018. Well, rates now are so much cheaper. Why don’t you call me up and we’ll see what we can do?” If that’s not the case, how does it work?
Thuan Nguyen: We are from Silicon Valley, so we use technology! So, when the customer works with us we have a rate alert that emails them the rate every morning automatically. So let’s say I have 2,000 customers now, those 2,000 customers receive an automated email every morning about the rate and all they need to do is call me or call my office if they want to lock. So it saves tons of time. Imagine if I have to make 2,000 phone calls every morning to update them on the rate, right?
The second thing is, those alerts when we close the loan, we would let it sleep. And then after the early payoff period we turn it on automatically with the new rate, the target rate. And let’s say four or five months from now rates drop, my system will know and notify my customer automatically. I don’t have to make a phone call. So my system automatically lets my customer know if rates drop so they can refinance.
HW: Where are your customers located?
Thuan Nguyen: Northern California, southern California, Houston, Dallas, Washington. The West Coast mostly, but now we have offices in Orlando, Florida and Atlanta. We’re also opening up a new office in New Jersey now.
HW: Which lenders are you primarily working with?
Thuan Nguyen: We have a lot of different lenders, small and big. Big lenders like UWM or Quicken Loans. BlackStar, we work with a lot of different lenders. Whoever gives us the best deal or fastest turn-time. About 80% to 90% of our transactions close in 30 days.
HW: You’re handling a lot more transactions but if you’ve automated so much of it, are you busier than you were last year or even in March before the pandemic really hit?
Thuan Nguyen: This year I planned to triple my last year’s production. So I expect to have at least $1.5 billion this year. So I tripled last year’s production. But I am busier not because of that, I’m busier because I’m trying to expand. That really takes a lot of time. I can manage more transactions now with the upgrade in technology, the process and staff.
But I remember six months ago, back in March, we could not handle the volume. New loans were coming in and we could not do anything, we could not submit that for more than two days. Too many loans, just like right now, most lenders don’t approve the loan – we wait three, four weeks and then they approve the loan because that is the industry norm right now. Nobody can handle the volume.
HW: I’m really curious how you began developing this software. Mortgage brokers in general don’t have a reputation for being super tech-savvy. Are you a software engineer?
Thuan Nguyen: Seven years ago I ran into a problem. I had 200 loans and I could not use Helix to manage it. I could not keep track. So I developed the software, and it’s been seven years and a few million dollars. I don’t use any other software, I use my own only. And I have other brokers using it. We have about 37 brokers using the software for the past two-plus years. I charge $200 a month. I consider it very cheap because we have a lot of features, features that the broker will see as very useful. My company has about 5,000 loans right now and I can see everything in terms of the application process. I want to offer this software to a thousand brokers, but right now I have to prioritize my resources and doing loans is a higher priority right now.
HW: Can you share how much business you’re doing in refis versus purchase? Looks like about 70% of the originations industry-wide have been refis.
Thuan Nguyen: More than 90% of my business is refis, mostly in California.
HW: So these are good times, but when refis slow down, is that going to be a big hit to you? If interest rates tick up, a lot of lenders see margins compress and people lose their jobs. Brokerage shops too are likely to contract, right?
Thuan Nguyen: That will not happen to us because we have a huge customer base. And we view employees as valuable assets so I’d rather take a loss than let them go. So it’s important to keep employees and find something else for them to work on. One of the reasons I’m expanding is so that in case things are slowing down I still have work for my employees.
HW: What do you make of all the big IMBs going public? We’ve got Rocket’s IPO, UWM, Caliber, maybe LoanDepot and others.
Thuan Nguyen: Yeah, they’re all going to go public and it’s a very unstable business. If rates go up then they are not doing well. So if they all go public some of them will go under and we will see a lot more fight going on, a lot more competition. When they fight it’s going to be nasty. So I just hope that the broker will benefit, otherwise who knows. That’s a lot of change coming up.
HW: Do you have a forecast for the next year? You’re expanding pretty rapidly, by the time some of those offices are doing business rates will probably be up.
Thuan Nguyen: I believe in the long term – so my vision is a lot longer than just one or two years. I’m looking at five, 10 years ahead. Refinance comes in waves. The rate is low now and then the rate will be higher. But eventually it will come down again. So we need to prepare for the next wave. And that is when you get the most money.
HW: Will you transition to more purchase as the market moves?
Thuan Nguyen: Of course, of course! We still do good on purchase, we don’t ignore that segment. We have dedicated resources for purchase.