Nearly every loan originator is fixated on going after the purchase mortgage market in 2023 following a brutal 2022 — a year in which even some of the top producers saw their origination volume drop to 20%. That is also the case for Chris Gallo, senior loan officer at NJ Lenders Corp. and Scotsman Guide‘s fourth-ranked LO in the country.
After dropping from $1.2 billion in origination volume in 2021 to less than $500 million in 2022, Gallo plans on using his database of former clients — which make up to 70% of his referral business — to follow up and check in this year. That’s something he wasn’t able to do often during the refi boom.
“That’s going to be a big part of 2023, just kind of getting back to the basics of managing data and managing our previous relationships,” Gallo said in an interview with HousingWire.
As a mortgage banker who does business solely in New Jersey, Gallo expects to see home equity loans and mortgage loans getting love in the new year — due primarily to the lack of inventory in his market and the equity built up in owners’ homes.
“People always know people [who are] buying. People always have friends doing something — and people [are] becoming investors buying second homes, third homes — so it’s just good to stay in front of them, because you don’t realize until you look back on how many people you actually probably lost by not staying in front of them,” Gallo said.
While he hopes the housing market may find some consistency again after a volatile year, Gallo forecasts his origination volume this year to be similar to what it was in 2022.
Read on for more about Gallo’s business strategies for 2023, his general take on LO compensation and prospects for the housing market.
This interview has been condensed and lightly edited for clarity.
Connie Kim: It’s been a tough year for even the top producing loan originators in 2022. Have you hit the $1 billion sales volume?
Chris Gallo: Unfortunately, no. My approximate volume for 2022 was a little less than $500 million for around 920 deals in total. Believe it or not, I don’t do numbers on a month to month or quarter to quarter basis. I kind of go with the flow essentially. I’ve never been a big kind of projection or goal-oriented individual. My goal is to always be busy and continue to go with the momentum.
Connie Kim: The most recent Scotsman Guide list of top LOs shows that 33% of your volume came from purchase mortgages and 67% from refinances. The name of the game in the industry was purchase mortgages. How have you changed your strategy to target those clients?
Chris Gallo: I wouldn’t say it shifted much. I don’t do cold walk-ins [and] I’m not going to start cold walk-ins. I would say internally, we’ve kind of shifted things around to manage and accommodate our referral partners better — and just be better. With the last few years being so busy, it wasn’t easy to manage everything and manage the volume at the same time.
We’ve shifted gears a little bit in the way we’re handling things with our referral partners. The year 2023 is going to be a little bit different. We’re going to try to implement different strategies to drum up more business and to help our referral partners out in different ways that can help them generate more business, which will ultimately help us generate more business.
Connie Kim: Then who are your main referral partners – Realtors? Financial advisors?
Chris Gallo: Probably about 60 to 70% of our business comes from referrals from our previous clients. Attorneys, Realtors and clients essentially are a big part of our repeat business – managing them a little bit differently, managing them a little bit better, and helping them out in different ways — tweaking things that fell by the wayside during a very, very busy time.
For instance, [managing] smaller relationships that we’ve never really had but we didn’t realize we were getting business from — these relationships. We’ve been able to focus on them more and step back and look at the business from a different perspective.
Connie Kim: Are you doing all these deals by yourself or do you have a team that helps with sales? How does it work at NJ Lenders?
Chris Gallo: I have a production partner and processors. That’s it. I don’t have anybody else that essentially is taking loan applications. I do have my brother who works for me — he’s licensed in New Jersey, and in all the other states. I’m not; I’m only licensed in New Jersey, so I take all the New Jersey business. He (my brother) is on my team, but he’s essentially handling a whole other aspect of it. That’s not even factored into my numbers. My numbers are solely New Jersey.
Connie Kim: In an interview with another outlet, you put great emphasis on managing data of your clients as being the key to becoming a top LO. What other factors helped propel you to the top?
Chris Gallo: There’s not one in particular that has helped me excel. Obviously, managing your previous relationships, and kind of touching on your previous relationships — your data from previous years — is huge. I think that’s a very large part of business. For me, managing it has always been one of my strong points, and touching base with them from year to year. A lot of the business was calling us because of our previous relationships.
But we haven’t been great at managing our data over the last few years. That’s going to be a big part of 2023 — just kind of getting back to the basics of managing data and managing our previous relationships.
People always know people [who are] buying. People always have friends doing something — and people [are] becoming investors buying second homes, third homes — so it’s just good to stay in front of them, because you don’t realize until you look back on how many people you actually probably lost by not staying in front of them.
Connie Kim: What does NJ Lenders do for you as a top LO that is different from other big national lenders?
Chris Gallo: We’re a local lender that’s been around for over 30 years helping people buy, helping people refinance with construction loans, whatever it may be. They’ve got a strong name in the northern New Jersey area [and] in New Jersey in general. NJ Lenders has relationships with local banks that some of the bigger national lenders don’t have. They’ve seen the ups, they’ve seen the downs.
One of the owners of the company is an originator himself and has been a top-producing originator for many, many years. He’s very well networked across the country, so he’s always bringing in new sales strategies and new little nuggets that people in possibly California are using that New Jersey is not used to, or different parts of the country that we’re not exposed to.
Connie Kim: It’s going to be another tough year for LOs — at least for the first half of the year. Some LOs have or plan on getting licenses in multiple states to close more sales. Is this something you’re considering?
Chris Gallo: No, I’ve given that to my brother, who is two and half years in the industry. When he came on to learn the business and help, I said to him, ‘Hey, listen, here’s your opportunity.’ This was when the refi business was booming a little bit. I get a lot of referrals, and people say, ‘Hey, can you help in New York? Can you help in Pennsylvania? Can you help in Florida?’ I would have to give it to other people at the company who were licensed there. I couldn’t do it. So he’s kind of taken that [and] run with it.
Connie Kim: Let’s zoom in on the New Jersey housing market. Housing prices were up in 2022 from the previous year, while the number of homes for sale fell. With rates widely expected to drop in the second half of 2023, are you optimistic that the housing market in NJ will see more transactions this year?
Chris Gallo: I do feel that some buyers have dropped out of the market to buy based on the aggressiveness of how the markets have been, especially with the rates going up. But I do feel a bigger part of it has been inventory, which has always been a big issue across the country — but in New Jersey more so just because there’s not so much land to build any more in New Jersey.
I do think 2023 will be a little bit of a better year from a purchase perspective, especially as rates kind of settle a little bit. But I think the inventory is the biggest piece that has to kick over for this to really take shape.
Connie Kim: Let’s shift gears and talk LO signing bonuses. For the top LOs in 2022, even when the rates were climbing, signing bonuses were still happening. Are you still seeing that? Are you getting recruiting calls with six, seven figure signing bonuses?
Chris Gallo: Recruiting calls? Probably six, seven times a week. I don’t really take many of them. I’ll talk to people just to network in general with someone from a bigger company or somebody who I respect. I have no problem just talking to them, hearing them out, and seeing what’s going on, but no one offered me any checks with seven figures on it. I did hear of some people getting some very large signing bonuses. No one had ever approached me with anything that was sizable enough to make me move my business from where I am.
Connie Kim: What’s your take on LOs compensation in the industry? Some LOs have been voicing concerns about having to take on more loans with reduced compensation to make ends meet.
Chris Gallo: It’s going to all flow from above, right? For lenders to tighten up, one of the ways is to increase their margins, which is going to affect the loan officer. If things are tightening from up top, the LO is probably going to be forced to reduce their basis points to be aggressive.
I mean, it’s survival of the fittest, right? If you’re overpriced in a market where everybody’s beating you, you’re going to have to cut your comp. But if you don’t want to cut your comp, I think the door is going to be the only way out.
Connie Kim: How does LO comp work at NJ Lenders?
Chris Gallo: It’s similar to every other company – there are comp plans in place, and you select the comp plan you want to be on based on the marketplace you’re in. From a company’s perspective, I think there’s a few plans that you can choose amongst — two or three buckets.
If you’re in an area where you’re doing predominantly FHA business or whatever, it may be priced differently, and if you want to be in a little bit of a higher bucket, you have that opportunity. From from my perspective, I know where I’m at, where I’ve always been, and that’s kind of the workflow for my business
Connie Kim: Have you also noticed retail LOs moving over to the wholesale channel? Lower pricing, less red tape in big-name retailers are what’s driving some of them to make the transition.
Chris Gallo: I’ve been hearing what you’ve been hearing, and I’ve been following it a little bit. When I started out, I used to work as a broker, so I understand the way the model works. I haven’t worked in it in 15 years. Maybe it’s changed more favorably to a way a loan officer could do business — and possibly the way that the comp is structured. I could see in a slowing market more people gravitating toward the broker channel.
I think the broker channel is a great channel, but I just don’t think it’s for everybody — especially an originator who’s doing high volume. Maybe it would be a better channel for someone who’s a lower volume base guy who can kind of coddle the business, pick and choose where you want to go and how you want to do it. I think the banker channel is probably the better route for someone looking to do volume, looking to have the sharpest product, [and] being able to do what we know best.
Connie Kim: Origination volume for 2023 doesn’t look rosy compared to 2022. Is there anything that keeps you hopeful?
Chris Gallo: I hope that the silver lining will be that the market has recalibrated enough where we can have a normalized market, whether that be 20 deals a month, 10 deals a month, five deals a month, [or] 15 deals a month. I feel like we may be able to find some consistency again like we did two years ago or three years ago before the rates went crazy.
With that normalization, I think it will be easier for people buying, and it’ll be easier to manage your database differently and possibly pick up some refinances here and there due to the little dips you may catch in the market throughout the year.
Connie Kim: The mortgage industry saw home equity loans and HELOCs pick up steam in 2022. Do you expect to see this trend continue, and what other products will gain traction?
Chris Gallo: We did see a lot of that with just equity in homes going up. We’ve seen a lot of people [who] as opposed to moving [are] renovating or pulling money out to do certain things that they’ve always wanted to do — travel, buy second homes, whatever the case may be. I think that trend will continue into this year.
I also think there is the potential for the renovation loans and products like that to pick up a little bit as well because inventory is low. People are going to have to make do with what they have.
Connie Kim: I understand you don’t necessarily keep track of your sales numbers, but how do you expect your business to be this year?
Chris Gallo: I’d say I think equal, if not a little slower. I would be happy with it being equal, and if it was a little bit less, that wouldn’t be that bad at all. But I definitely don’t see much change that can make it kind of better. If we could be on pace to do what we did last year, I think that would be a very good market.
