Going from a volatile rate environment in the latter half of 2022 to a market with lower, more stabilized rates, there’s optimism spreading across the industry that buyers will come back. Just two weeks into 2023, Guaranteed Rate‘s top LO and managing director Ben Cohen has also seen an increase in inbound calls from buyers wanting pre-approval for mortgages.

While a lack of inventory still remains an issue, Cohen expects first-time buyers to come back to the market now that they’ve become more realistic with mortgage rates and rents soaring.

“I think you’re going to see a much bigger push for first-time homebuyers more than anything because of the rate lockdown effects,” Cohen said in an interview with HousingWire. “You own a home at 3% [and] you want to go buy a new home at a rate of 6%? You are probably not going to do that unless you really have to do that.”

After originating $1.66 billion in 2021 to become the third-ranked LO in the country on Scotsman Guide, Cohen’s production volume dropped 60% in 2022 to about $647 million.

Lower production volume means cutting staff and restructuring to better focus on the purchase market, Cohen said. Training LOs and getting on sales calls with real estate agents, insurance agents and wealth managers are what Cohen is prioritizing to drum up sales in a market where he expects rates to be in the 5% levels.

Read on for more about Cohen’s business strategies for 2023, his take on the housing market and what mortgage products to pay attention to this year. 

This interview has been condensed and lightly edited for clarity.

Connie Kim: There seems to be optimism in the mortgage industry at the start of the new year. How have the first two weeks of January been?

Ben Cohen: I’ve definitely seen an increase in inbound calls from people wanting to get pre-approved to buy a home. The psychological component of interest rates doubling – everybody gets it. [They’re asking] what can I afford? How does my payment look? I really think until we see inventory move in our favor, it’s still going to be a tough market for a buyer.

If you’re buying a condo in downtown Chicago, there’s a lot more inventory; there’s probably more deals to be had. If you’re trying to buy a single family home in the suburbs, get in line, right? The minute that house comes on the market, there’s going to be 10 people who want it, and three or four of those 10 will probably overpay because there’s nothing else to buy.

Kim: So would you say it’s a seller’s market right now? I ask because we’re seeing a lot of seller concessions, such as temporary rate buydowns offered to buyers. 

Cohen: At the end of the day, there are markets that have low inventory. I would almost classify it as a seller’s market, because sure, they might not have 20 people who want to buy that home like they did 18 months ago. But now they still might have five people who want that home. Everybody’s clamoring because again, when that house comes up, it goes quickly because there’s just not a lot of inventory. 

So until you see inventory stabilize, I don’t necessarily know if I still think it’s a buyers market again. Every city and state is different, so depending on where somebody calls me and where they’re looking for a house, I change my tune accordingly based on what I know about the demographics of those areas.

Kim: There’s wide expectation that the Fed will raise interest rates by 25 bps in February. It’s not as big of a hike as the 75 bps we’ve seen in the past months, but how do you think it will affect potential buyers?

Cohen: I don’t think it’s gonna have any impact. I think you’re going to see a much bigger push for first-time homebuyers more than anything because of the rate lockdown effects. You own a home at 3% [and] you want to go buy a new home at a rate of 6%? You are probably not going to do that unless you really have to do that. 

So I think you’re going to see an increase in first-time homebuyers, [and] why? Rents are more expensive. Their landlords are calling them saying I’m jacking your $2,500 rent up to $3,000. They’ll just go buy a home; they could put 3% down. It just makes more sense. So I don’t know about existing homeowners because I think they’re all sitting on such cheap money. They’re going to either hold onto that home [or] keep it as a rental. 

Kim: Lenders are rolling out mortgage products that make it more affordable for buyers. How many of your buyers have opted for temporary rate buydowns, and what other products do you expect to gain more traction? 

Cohen: Maybe 25 or 30% of people are taking that (temporary rate buydowns). Some people say they don’t want to inflate the purchase price to just get a credit to buy down my rate. So I would tell you that the more sophisticated borrowers that actually dig into the numbers, they’re probably a little bit less apprehensive of the [temporary] buydowns. Or the biggest problem with the buydown is a lot of people buy a house and then they try to do the buydown, so you almost have to renegotiate the deal. So unless you’re prepared and educated on the buydown, a lot of times it doesn’t work because people don’t want to go back to that seller. 

The most popular one right now that’s out there is Fannie Mae and Freddie Mac’s program [for low income or first-time homebuyers]. It used to be geographically based. Now it’s based on certain income, and again, depending on what city and state you’re buying in, that number is going to change.

Kim: All the top LOs I’ve spoken to who closed $1 billion in production in the past didn’t hit that mark last year. Is that the case for you as well?

Cohen: I think I closed the year at about $647 million. You have to put things into perspective, right? Pre-pandemic, I did $1.7 billion in 2021. Sure, that was amazing. About 53% of it was refinance-driven. I’m not basing my numbers off of that. Am I going to try to do a billion dollars this year? Sure, that’s always going to be my target. That’s just where I’m trying to model my business off of and where I’m trying to grow things.

Kim: How big is your team and how is it structured? Has that changed with how you’re trying to do things differently this year?

Cohen: That number (team size) changes from week to week right now. We’re hiring, we’re realigning, [and] we’re repositioning people. There’s no secret that we’ve had to make layoffs. We’re making consolidation. We have two processors instead of four processors [on my team]. I’m now focusing on team Ben Cohen instead of being just Ben Cohen. My focus right now is to help originators get in the game, help them, help me, help my business and I’m going to focus on business relationships. 

I’m in charge of sales and originations, [production manager] Mike Dye is in charge of operational [focusing on] how do we manufacture and get a loan done from A to Z, how do we incorporate what Guaranteed Rate has to offer from a technology standpoint, [and] how are we communicating that to our customers and our referral sources. 

Kim: As with many other top LOs, you’re focusing on building your brand, focusing on relationships. What does your day to day look like? 

Cohen: Some mixture of sales calls – whether it’s with clients, or [to] help managing existing relationships from a referral source, or getting new relationships out there. So that’s kind of what my day is divided up as. It’s spending some time with my team, making sure we have our mission statement in line and [determining] what we want to accomplish from that day and on that week. Then, it’s really more just me getting on the phone, you know, selling mortgages and talking to referral partners and trying to create new referral partners.

Kim: Who are your main referral sources?

Cohen: Everybody. The wonderful thing about my business is everybody is a referral source, whether it’s a past client [or] a neighbor. Specifically, my referral partners are obviously real estate agents, wealth managers and insurance people. I do a lot of corporate stuff where I try to become a preferred lender for an organization to bring value out there so that they know they have a trusted source that the company’s already vetted out. 

Kim: Are you optimistic for a better year with rates going down?

Cohen: I’m always optimistic. I’m a very positive person. My job right now is to almost be a therapist to my buyers and my real estate agents. I have to explain to them that a 6% mortgage rate is not crazy high. We don’t know what high interest rates are, right? Is it a high rate relative to 3%? Sure, but at the end of the day, I have to bring people back to reality. 

I think we’ve seen a peak in inflation. Rates might go up a little bit again, but based on everything I read, all the projections are rates are going to come back down. They’re not going to go down to 3% again, but I think if a rate gets to 5% – whether it’s the mid-fives, or the low-fives or the high-fours, that’s a pretty healthy interest rate for a home, quite honestly.