Nearly all loan originators are focused on the 2023 purchase mortgage market. This is after a very difficult 2022, in which some top producers had their origination volumes drop to 20%. Chris Gallo is a senior loan officer. NJ Lenders Corp. And Scotsman GuideThe fourth-ranked LO of the country.
Gallo will use his former clients, which account for 70% of his referral business, to check in on his customers after a drop in origination volume from $1.2billion in 2021 to $500m in 2022. This is something Gallo was unable to do during the refi boom.
Gallo stated that “that’s going to a large part of 2023 just sort of getting back the basics of managing data, managing our past relationships,” in an interview with HousingWire.
Gallo, a New Jersey-based mortgage banker, expects home equity loans to be in demand in 2019. This is due to a lack of inventory and equity in homeowners’ homes.
People always get to know each other [who are] buying. Friends are always good friends. [are] Gallo stated that investors can buy second or third homes. It’s a good idea to keep in touch with them because it will help you realize how many people have been lost by failing to do so.
Gallo believes that the market for housing will find stability again this year after last year’s volatility, but he expects his origination volume to be comparable to 2022.
Continue reading to learn more about Gallo’s 2023 business strategy, as well as his overall take on LO compensation.
The interview was condensed for clarity and has been lightly edited.
Connie Kim: Even the most prolific loan originators have had a difficult year in 2022. Are you close to the $1 Billion sales mark?
Chris Gallo: Unfortunately, no. For 920 transactions, my estimated volume in 2022 was less than $500m. It’s true, I do not track numbers month-to-month or quarter-to quarter. I just go with the flow. I have never been one to be goal-oriented or projective. I want to be always busy, and to keep up with the momentum.
Connie Kim: Scotsman Guide’s most recent list of top lenders shows that 33% came from buy mortgages, while 67% were refinances. Purchase mortgages were the hottest topic in the sector. What has changed in your approach to these clients?
Chris Gallo: It wouldn’t have shifted that much, I would say. I don’t do cold walk-ins [and] I won’t accept walk-ins from the cold. We’ve shifted internal processes to better manage our referral partners — but that is just my opinion. Better. It was difficult to keep up with the volumes and everything in the past few years.
In the way that we deal with referral partners, things have changed a bit. It will be different in 2023. To generate more revenue, we’ll try different methods to get more clients and help referral partners in other ways.
Connie Kim: Who are your primary referral partners, Realtors? Financial advisors?
Chris Gallo: Referrals from past clients account for 60-70 percent of our business. Clients, attorneys, realtors are an integral part of our repeat clients. We manage them differently and better than ever before, helping to fix things that have fallen by the wayside in a busy period.
Take, for example: [managing] We were able to build smaller relationships than we had before, but didn’t know we were getting more business through these relationships. They have allowed us to be more focused on these relationships and allow us to look at our business in a new way.
Connie Kim: Do you do all the deals yourself, or are you supported by a sales team? What is the process at NJ Lenders like?
Chris Gallo A production partner is available. That’s it. There is no one else who can actually take loan applications. My brother works with me. He’s licensed in New Jersey and all other states. My license is only in New Jersey so all business comes from New Jersey. My brother is also on my team but handles a different aspect. This is not included in my calculations. These numbers only include New Jersey.
Connie Kim: Interview with another outlet: You stressed the importance of managing client data as a key factor in becoming a great LO. How did other factors help you get to the top of your field?
Chris Gallo: I haven’t found one that helped me succeed. It is important to manage your past relationships and touch on any data you have from the previous year. This is a huge part of any business. It has been a strength of mine to manage it and keep in touch with them year after year. We were referred to by many of these people.
However, we’ve not been very good at managing data in the past few years. This will be an important part of 2023, just to get back to basics about managing data and maintaining relationships.
People know everyone. [who are] buying. Friends are always good friends. [are] Investing in second and third homes. It’s good to keep in touch with them. You don’t know how many people have you lost because you didn’t stay there.
Connie Kim: How does NJ Lenders help you to be a top LO and stand out from the big national lenders?
Chris Gallo Our local lender has been helping customers buy and refinance their construction loans for more than 30 years. Their name is well-known in northern New Jersey. [and] in New Jersey in general. NJ Lenders have relationships with local banks, which is something that national lenders do not have. They have seen both the good and the bad.
The company’s owner is an originator and has been a high-producing originator for many years. His network is extensive, and he can bring in new strategies to sell the company, as well as new nuggets, that New Jersey may not be familiar with, or that are used in other parts of the United States.
Connie Kim: It will be another difficult year for LOs, at least in the first half. Many LOs are planning or have plans to get licenses in several states to increase their sales. This is something that you might consider?
Chris Gallo That’s not true. I gave it to my brother who has been in this industry for two and a half years. He came to me to learn and to help. This was back in the days when refi was starting to boom. People often ask me for referrals and say that they can help them in New York. Are you able to help me in Pennsylvania? Are you able to help Florida? It was impossible for me. He’s taken it as a compliment. [and] Follow it.
Connie Kim: Let’s take a closer look at the New Jersey housing market. The number of available homes fell and housing prices rose in 2022 compared to the year before. Are you positive that NJ’s housing market will have more transactions in 2019?
Chris Gallo Some buyers may have left the market because of the aggressive nature of the market, particularly with rising rates. However, inventory is a larger part of the problem. This has been an issue all across the country but more so in New Jersey because there isn’t as much land available.
From a purchasing perspective, I think 2023 will be slightly better than the previous year. Rates have settled a bit. However, I believe inventory is what will really make this happen.
Connie Kim: We’ll now talk about LO signing bonuses. Signing bonuses still existed for the highest LOs of 2022 even though rates were rising. Do you see that today? Do you still receive recruiting calls offering six- or seven-figure signing bonuses?
Chris Gallo Recruiting calls? I would say six to seven times per week. They are not very common. To network with people from larger companies or someone I trust, I will talk to them. Although I am comfortable talking with them and hearing their stories, it is not a problem to see what they are up to, no one has offered me checks in excess of seven figure sums. Some people received very high signing bonuses, however. Nobody has ever offered me anything substantial enough to allow me to move my company from the place I’m at.
Connie Kim: How do you feel about LOs getting paid? A few LOs expressed concerns that they would have to accept more loans for less compensation in order to survive.
Chris Gallo All of it will flow from the top, isn’t it? One way for lenders to tighten is to raise their margins. This will affect the loan officer. The LO will likely have to lower their base points if things get tighter from the top.
It’s survival for the fittest. You will have to reduce your compensation if you are overpriced and in a competitive market. If you do not want to reduce your comp, the door will be open.
Connie Kim: What is LO Comp at NJ Lenders?
Chris Gallo The comp plans are the same as any other company. You choose the plan that best suits your market. A company can pick from two to three categories.
You may find it more expensive if your business is predominantly FHA or other. If that’s the case, there’s still a chance to get in at a slightly higher price. My perspective is that I am where I want to be, not where I have been in the past. That’s my workflow.
Connie Kim: Are you seeing retail LOs shifting to wholesale? Some of these LOs are making the switch because they have lower pricing and less red tape with big-name retailers.
Chris Gallo It’s been a while since I heard what you were saying, so I have been trying to follow it. Since I was a broker when I first started, I have a good understanding of how the model works. It’s been 15 years since I last worked there. Perhaps it has changed in favor of a way that a loan officer can do business and perhaps the structure of the comp. In a slower market, I can see more people turning to the broker channel.
The broker channel is great, I believe it. However, I don’t believe it’s right for everyone — particularly originators who do high volumes. It might be better for someone with a smaller volume, who is able to coddle their business and pick and choose the direction you would like to take. The banker channel would be a better choice for somebody who is looking to make volume and have the best product. [and] Being able to do the things we are best at.
Connie Kim: The 2023 origination volume is not as good as 2022. Are there any reasons to be hopeful?
Chris Gallo The silver lining is that I believe the market has rebalanced enough to allow us to have normalized markets, which could be as low as 20 deals per month, 10 deals per month or five deals per month. [or] 15 deals per month. We may find consistency like it was two or three years back, before rates rose.
Normalization will make it easier to buy, as well as easier to maintain your database and maybe get some refinances due to any dips in the market.
Connie Kim: In 2022, the mortgage industry witnessed home equity loans and HELOCs gain momentum. What other products are you most likely to adopt this trend?
Chris Gallo That was not just because of the increase in equity. Many people have been affected by this. [who] As opposed to moving [are] Renovating or borrowing money to pay for things they have always desired to do, such as travel or buying second homes. This trend is expected to continue in the coming year, according to me.
There is also the possibility that the inventory of products and renovation loans could pick up. The people will have to be content with the things they do have.
Connie Kim: Although you may not keep accurate sales figures, how can you project the future success of your company?
Chris Gallo If it were a bit slower, I would say that I believe they are equal. It should be equal. If it were a bit slower, I’d be content with that. It is not something I can see making it better. It would be great if we were able to achieve the same level of success as last year.