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Heidi Patalano (00:35):
Hello, I'm Heidi Patalano, editor in chief of National Mortgage News. Welcome to what originators need in 2025. Today we're covering what home buyers want from their lender in 2025. We're looking at how lenders need to engage with them in 2025 and address what new generations expect in an Amazon-like transaction in everything they do. Joining me for this discussion is Jeff Nicola at Bay Equity Mortgage Sales Manager based in Bellevue, Washington. Jeff, thank you so much for joining us.
Jeff Nicola (01:11):
Thank you, Heidi for having me. I appreciate it.
Heidi Patalano (01:13):
Yeah, yeah, I'm very interested to talk to you. So I guess you could start by telling me a bit about your work with Bay Equity. I know Bay Equity was acquired by Redfin in 2022, but you've been there throughout that transition from long before then. So just tell me a little bit about what Bay Equity is doing right now in regards to reaching borrowers in the next year.
Jeff Nicola (01:43):
Yeah, that's a good question. I mean, especially with the merger with Redfin over the last almost three years now, coming up on it, it's been two different cultures merging together. So it's kind of like an arranged marriage, but over the course of the time of getting to know individual real estate agents, we've formulated not only just working friendship, but the actual deeper friendship so we can understand what type of client that the Redfin base is working with so we can dive into that culture and really help them out with the growth.
Heidi Patalano (02:14):
Right, and that's so interesting about where you're coming from here because Redfin is offering a bit of a one-stop shop kind of situation. The kind of thing that, as I've said earlier, is what consumers are expecting more and more these days. You find it online, click, click, click, you own it, it's shipped to you other products obviously. So it must be interesting going from the before Times of Bay Equity to the present time. Could you walk us through what that transition was like in terms of the functionalities offer to borrowers?
Jeff Nicola (02:56):
Yeah, the expectations and the timing of the online borrower is very, very rapid and that is what they expect. And so with that expectation in place, we had to pivot a little bit from a branch level to ramp up because there is so much volume coming in, even in a down market. It's just the sheer volume of all the clients that Redfin capitalizes on through that online portal, we needed to add employees in order to keep our production levels and our service levels at the same amount. And then I think also connecting with borrowers to setting the expectations. You mentioned Gen Z and you do two clicks and then within four to six hours over here in the Seattle area, you can literally have groceries delivered to you. And that's kind of the expectation of the mortgage. And so being able to engage with the borrower over the phone or over a text or some type of communication so they have a clear set of what those expectations are, really, really helps process out.
Heidi Patalano (04:04):
If we could dig into how that changed when you had to kind of scale up for Redfin before that, how were customer relations managed at Bay Equity before you entered into this partnership or this ownership?
Jeff Nicola (04:21):
There wasn't as much of sense of urgency. I can get a call from the agent saying, Hey, I'd like to do an introduction to you. Are you free later on this week? Can you free out some time? And of course I was like, yeah, of course I can. Whereas the borrowers at Redfin need that information. They're information seekers. And so the quicker that we can provide that information to the Redfin clients, then that builds the relationship. So we do have to move a lot quicker. And that was the biggest change that we saw is that the expectations of quicker information to the borrower so the borrower could feel comfortable working with us, get that information so they could talk to their family members and then put those offers in.
Heidi Patalano (05:07):
Right. They're expecting almost instantaneous kind of reaction results, information. So on your backend, what does that look like? I mean, did you guys take on technologies that Redfin had available? Because I know they also had a mortgage arm for a time that they shuttered after acquiring gay equity. What did it look like in terms of creating that ability to provide that information so quickly?
Jeff Nicola (05:36):
So two things that we added. One is with the advent of AI getting more and more integrated into the mortgage industry itself, we have an automation process where once the borrower takes application, if they consent to us to reaching out to their payroll department and the application is finished within about five minutes, we get W twos pay stubs. If they click on an Accu check button, we can also share access to their assets. So when the borrower completes the application, literally within 10 to 15 minutes, we can see all the borrower's actual pay stubs, income assets and those things to help us make sure that the borrower's going to get qualified.
So automation was really huge to help us create more efficiencies. And then from a lot of branch level processes, we added another person. I think a lot of branches did this as well, but we specifically added another person to have weekend coverage to make sure that our Redfin clients and then our non Redfin clients are getting access to us to provide that information so we can continue to issue up pre-approvals at six o'clock at night on a Sunday afternoon.
It's been fun to have that into place and create more of that team atmosphere. So I personally, we hired a personal loan officer assistant for my team and she has coverages on the weekend. We alternate weekends, so we do have a little bit of a life balance, but the Redfin and the agents that we work with, there's always somebody there to help them regardless about the time.
Heidi Patalano (07:11):
And the automation that you put in place was that we're always talking about vendors at National Mortgage News. Which vendors should the lending shops take on? Do they build versus buy? Was it proprietary or was it something that you outsource from a specific vendor, if you could say,
Jeff Nicola (07:32):
So we did it through an outsource within True is the company that we work with. In order to extrapolate that it doesn't work with every company and self-employed borrowers are excluded obviously, but it does work with about 75, 80%. And in our world, at the branch level, at the loan officer level, at the loan officer assistant level, that's huge because I mean, when a borrower comes to us at eight o'clock on a Sunday afternoon and the offer review date is Monday at noon, if the borrower can just take the application at some point in time at night at 11 o'clock, 12 o'clock, our team's going to be in there at 6:00 AM My loan office for assistant will review it by eight by nine o'clock, I'll have a summary of what is going on with the transaction. I can spot check it for 10 or 15 minutes, and then I can reach out to the borrower, issue out the preapproval itemization fee worksheet, and we can move so much faster because of that technology and that extra person in place.
Heidi Patalano (09:05):
With your partnership with Redfin, of course, like you're saying, you have this high volume, you have high demand, and I wonder how lenders who don't have that can manage to also achieve being so accessible and being able to turn around those quick responses while also maybe not having the kinds of volume that you may be having. It's an interesting question.
Jeff Nicola (09:35):
It's a challenge. In the mortgage world, we used to start off doing, hey, if you could do two to three loans, you don't need a processor, you don't need a loan officer assistant. But then from an individual revenue source, you can't make a lot of money if you do that and bring in the revenue in order to grow. And so the only way to grow with our style of it with Bay Equity is to add more individual pieces that just focus on one section. So for us, we have one process that handles all the business. We have a loan officer assistant on the front end, we have a loan officer assistant on the backend, and then we have a junior processor that does all the order routes. So it's built for doing 20 to 30 loans on a monthly basis.
Heidi Patalano (10:28):
So window speed is huge, but when you're looking ahead at 2025 and kind of aiming for the stars saying, this is the blue sky area that we want to get to, this is where we want to be better and do more, this is where we want to meet the customer need where we maybe aren't a hundred percent media yet. What are those things that you want to see a growth in the next year?
Jeff Nicola (10:54):
AI for one, I think that integration would be awesome. I know that there's a couple of things on the horizon with Bay Equity that we're trying to incorporate. One would be not only adding in the fact that we've recently added the pay stubs, the bank statements, the W twos to incorporate that, but the next level step is to have it run through a US findings, which is automated underwriting systems with Fannie Mae and Freddie Mac. And that's the other step. So when it hits to the loan officer assistant, not only is all that debt and 90% of the data in there, but she also, that person in the LOA position can also review the a US findings to give more accurate results. And we don't have to wait. That will save us some more time to offer our clients a little bit quicker response times and more direction.
Heidi Patalano (11:47):
That's interesting. So what's underway in terms of helping to make that happen? What are you working on?
Jeff Nicola (11:55):
I would love to know that answer. That's a different title than what I wear, unfortunately.
Heidi Patalano (12:02):
Fair enough. Fair enough. Yeah. Yeah, that's interesting. What are other areas where you think client expectations are kind of in another place and just the field in general? The mortgage industry in general needs to do better to meet those needs.
Jeff Nicola (12:22):
One misconception that I consistently hear at the beginning of the merger, because at the beginning of the merger we started to have rates going up and I consistently heard for that first 18 months is, Jeff, the rates are too high. I don't want to buy. I just can't do it. Can't do it. And it's value valid. It's a valid response because that consumer has been used to two and a half percent, 3% for two to three years, and going from that space up to 6% is a shock. And it was a real shock for a lot of borrowers when it went up to low sevens. But I think I'm not hearing that response anymore over the last 12 months. I'm not hearing well, the rates are too high. I think it's setting in at these are the rates of where they're going to be at.
(13:07):
And then for 2025, I do expect they're going to drop down a little bit. I think we're going to be bouncing around that 5.75 range to about six and a quarter, and that's going to be predominantly based on in the first quarter, what the new president-elect will be doing and try and incorporate some of his policies. And then obviously monitoring what inflation is and job growth. Another concept is that I think 2025 is a good forecast, but right now there's a lot of good time to purchase a house. The option of acting now, especially during the holidays, people don't have their houses on the market intentionally on the holidays. So people that have the homes, they're distressed sales, there's unfortunately there's a divorce, there's a job transition, they're potentially a death in the family. And so those are motivated sellers and the buyers can get into the house, have a two one buy down, have a start rate for the first 12 months of like 4.6 2 5, 4 0.75, and that eliminates that pushback on the affordability. The borrower can always come back and refinance within the first two years, and whatever is not used in that seller concession for the buydown gets applied to the borrower's new balance. So they never lose any of those funds from the seller.
Heidi Patalano (14:34):
That's a really good bit of wisdom there. Kind of going when it's quiet when other people aren't out there hunting for a house, get out there.
Jeff Nicola (14:44):
Right, absolutely. That's the time to buy when nobody else is.
Heidi Patalano (14:47):
Yeah. Do you have any other interesting predictions for 25 in terms of the housing market? What else do you see happening?
Jeff Nicola (14:55):
I still conceive, especially in our local neighborhood in Puget Sound, that it's going to continue to appreciate based on our employment growth and the occupations that we have out here with the tech industry. So we have a history over the course of the last 40 years of having appreciation on average of 4.72%, which is pretty strong when you look at it in the overall perspective. I think that it's going to slow down a little bit, but I'm still expecting three point a half to 4% with the average home price out here in King County at a million dollars. That's a huge amount of growth. Again, when the borrower's saying, I'm looking at a million dollar purchase, I'm going to put 20% down, it's an $800,000 loan, and the borrower comes back and goes, I'm going to wait till the spring because that's when there's more inventory out there and I just want to wait until the rates get a little bit further. Hey, if we take 4% of appreciation on an $800,000 or a million dollar house, that's $40,000. And if they're waiting for six months to save $500 a month, they're wanting to save $3,000, $500 a month of a course of six months, $3,000, but they're losing $20,000 of appreciation in that period of time. So it's the cost of waiting, I think needs to be conveyed to the borrower to get into the home purchase. And of course, they can always refinance down the road if rates and when they do come down,
Heidi Patalano (16:34):
That is a great piece of wisdom, a great bit of wisdom to share with fellow loan officers out there who are trying to talk to their clients and trying to get them to the table. Any advice you would give to loan officers out there for 2025 at other shops? Any colleagues, anyone in the field that you trust and want to help along? What else would you say to them about what they can do to better prepare for 2025?
Jeff Nicola (17:08):
Well, I think there's going to be a lot more attrition, and we'll find out what those numbers are coming in January and February when we don't see the final results of people applying for their loan officer license. And I think that'll be creating more opportunities for people that are staying in the market, less competition. I think that as long as you're staying in front of your client base on a consistent basis, reaching out to the real estate agents, keeping in contact with them on a weekly basis. I'm a strong believer in having quarterly reviews on Fox that hep closed. Let's see where we can get better and what are some positive things and what are some things that we need to improve upon. And I think that builds together that between the agent and the loan officer to have much more success and growth.
Heidi Patalano (17:56):
Well said. Alright, Jeff, well thank you so much for your time. It's been such a pleasure to speak with you and I wish you a wonderful holiday season.
Jeff Nicola (18:05):
Thank you so much, Heidi. Appreciate you having me. Take care.