Jennifer Hernandez, Senior Loan Officer, Legacy Mutual Mortgage

In an interview with Invest: Jennifer Hernandez, senior loan officer at Legacy Mutual Mortgage, shared the benefits of being slightly overstaffed given the market’s unpredictability, noted the shift in Houston’s real estate market from a sellers’ market to a more balanced state, and the diversification of their lending products as they grow.

What have been some major highlights over the past 12 months?

As I celebrate my 28th year in lending, I have recently hit a stride with my YouTube channel as well. Launched five years ago, it started as an outlet for the wealth of information in my head and also to counter the misinformation online. Posting two videos a week since 2019, I now have over 500 videos, providing valuable, easily digestible information. This year, I focused on improving video quality, resulting in a fourfold increase in monthly views from 7,000 to 30,000.

As an industry veteran, this endeavor has given me a renewed sense of responsibility. Beyond originating loans, I have discovered a passion for being an advocate for homeowners. At 52 years old, with 28 years in the industry, I’m contemplating my legacy. This year has been a stepping stone, offering clarity about my future in the mortgage industry. It’s not just about individual client interactions; it’s about making a broader impact and advocating for homeownership. This realization has made this year particularly exciting for me.

What do you consider to be the most significant trends and changes in the real estate industry in the Greater Houston area?

In the real estate cycle, there has been a notable shift from a sellers’ market to a more balanced state, presenting a unique challenge. Houston, while not regressing, is experiencing an unusual quagmire of high demand. Despite a considerable desire to buy houses, even with current interest rates, only a fraction of the 80 referrals per month result in closures. The pent-up demand is unprecedented, driven by people rethinking their living spaces due to the pandemic.

Houston continues to attract individuals from other cities, and there’s a strong trend of people looking to relocate. The city’s offerings, coupled with a relatively manageable cost of living, make it an appealing choice. However, a significant trend is emerging: a desire for change that faces the challenge of an unavailable conduit. Many individuals, unable to afford housing in their preferred areas, are currently on hold.

The forecast anticipates a surge in market activity when interest rates ease. The current hold on plans is expected to lift, resulting in a flurry of real estate activity. This trend, observed through consistent interaction with 80 potential clients monthly, suggests a brewing storm of heightened demand and activity. As the market eases, the influx of eager buyers is predicted to resemble a hurricane, bringing both challenges and opportunities.

What are some overarching opportunities for Legacy Mutual Mortgage in 2024, and what strategic steps are you taking to capitalize on these opportunities?

Maintaining a slightly overstaffed team has been a strategic move, given the anticipation of market shifts, particularly during times of rate drops when the floodgates of demand tend to open. With almost 70% of my business stemming from realtors, I place a strong emphasis on education for both past clients and realtor partners. This involves a multifaceted approach, including regular communication through emails, the sharing of insightful content such as YouTube videos and podcasts, and active participation in talks or webinars.

Which lending products do you anticipate performing better than usual, and are there emerging ones to meet the demand for loans that banks might be hesitant to provide?

The FHA and conventional loans remain mainstream, but our company has introduced more hybrid products in the last year or two. One noteworthy product gaining traction is the Debt Service Coverage Ratio (DSCR) loan, designed specifically for investors. This product simplifies the qualification process, requiring a credit score and basic eligibility. It’s particularly attractive for individuals facing hard times or those with unconventional income structures, as it considers the property’s monthly rent to support the monthly payment.

I’ve observed a notable interest in the DSCR loan, with increased inquiries and positive feedback. Many individuals, especially those struggling to showcase their true income on tax returns due to deductions, find this program appealing. The DSCR approach, where the monthly payment must align with the average rent for the area, offers flexibility in financial scenarios. While it often requires a higher down payment, typically around 30%, the program’s unconventional nature addresses specific challenges faced by investors.

Despite being more expensive with a higher interest rate, the DSCR loan fills a gap for those who either prefer a streamlined process without excessive paperwork or face hurdles in traditional income documentation. The program’s popularity underscores the need for diverse financing options that cater to the unique circumstances of investors.

Another notable trend is the increased interest in cash-out refinancing, driven by financial challenges. Homeowners, impacted by economic uncertainties, are seeking ways to access their home equity. The significant appreciation in home values over the last few years has provided an opportunity for homeowners to leverage their equity for various purposes. Whether for investment or debt consolidation, the cash-out refinance option, even with a slightly higher interest rate, offers a more favorable alternative than accumulating high-interest credit card debt.

How has your partnership with Texas Partners Bank added value to the services you provide for your clients and partners?

Over the past 12 years, Legacy has strategically aligned itself with a local Texas bank, Texas Partners Bank, serving as a silent partner behind the scenes. This collaboration has proven beneficial from a lending perspective, especially when acquiring contracts.

In the lending landscape, a significant portion of mortgage companies, around 80%-90%, eventually sells servicing rights to larger entities like Wells Fargo or Citibank, resulting in the top 12 to 15 servicers handling most loans. When securing contracts, the reputation and financial stability of a lending company play a crucial role.

Being associated with a reputable bank provides us with a distinct advantage. Large banks prefer doing business with reliable partners, as it mitigates the risks associated with potential buybacks or complications in the loan process. Having the depth and financial security of a bank like Texas Partners behind us ensures that we are viewed favorably by these major institutions.

In essence, Legacy, with the silent support of Texas Partners Bank, is positioned as a graded lender, maintaining high standards and reliability in the eyes of larger financial institutions. This symbiotic relationship not only ensures our financial stability but also allows us to provide an extensive array of products to our clients at competitive rates.

What is your outlook for the next two to three years and your top priorities within this time frame?

I previously mentioned the sense of a brewing storm, and I still hold the belief that the next two to three years, especially 2025, will be pivotal for Legacy. With this anticipation, I am actively considering the expansion of our team, particularly in Houston. I am keen on mentoring loan officers, providing guidance and support to those already in the industry. The goal is to ensure that we have the necessary bandwidth of talent to effectively handle the anticipated surge in business.

To fortify our position, we are currently sowing the seeds of efficiency across various aspects of technology. Over my ten-year tenure with Legacy, there has been a consistent focus on embracing the most efficient technological tools. This includes staying abreast of advancements in social media, online presence, and branding. The aim is to maintain congruence in our operations, ensuring that our technological infrastructure aligns seamlessly with our overall strategy.

Being a bit overstaffed is a deliberate strategy, allowing us to be proactive in our hiring practices. We pride ourselves on hiring ahead of the curve, always looking six months ahead to anticipate the needs of the business. This forward-thinking approach ensures that we have the right people on board to navigate whatever challenges or opportunities lie ahead.