Never Say Never

For Crescenzo, this down cycle differs from any he has lived through previously. Not only did the pace of interest rate hikes in 2022 and 2023 create earnings-to-expenses whiplash, but as borrowing costs rose, home price growth did not abate. Neither did Crescenzo’s production, though. As his competition feasted on refinances during the pandemic, he expanded his purchase base by focusing on his new construction niche.

As existing-home inventory dropped to its lowest level in decades last year, newly constructed homes became a bright spot for borrowers seeking more affordable options — or any options — amidst an ongoing affordability and supply crunch. When it comes to financing new-home purchases, preferred lenders eat the lunch of most originators by offering ample incentives on captive housing stock. 

Watch it on The Interest: Capturing Builder's Preferred Lender Fallout

However, Crescenzo has built a business and a reputation for closing files — and saving deals — that preferred lenders cannot. “We help people when others can’t or won’t,” says Amanda Baker, Nation One’s operations manager for the Southeast region. “We are truly just working on hard files, doing hard things every day, and making it work. It’s pretty cool.” 

Capturing ‘preferred lender fallout’ has proven to be a recession-proof business because there will always be deals that demand a second look. If mortgage loan origination is a game of inches, too, those builder deals usually fail by the hair of a too-low FICO or slight earnings gap.

“We might have eight different types of loan scenarios come through the door, and every one of these market conditions is hitting them differently,” says Crescenzo. “You have a veteran that just got back from deployment. You have a self-employed, small business owner. You have somebody that got their hours cut that was in manufacturing and was doing great in 2020–21.”

The “backlog” of prospective buyers who wish to buy newly constructed homes, but for one reason or another cannot qualify with preferred lenders, sport the bruises of damaged credit, unstable employment, or irregular income, to name a few knocks against their lendability. Originators and lenders rarely care to ask, “Why?”

“We know when we add up all those inches,” Pacino’s character says to end his half-time speech, “that’s going to make the f—ing difference between winning and losing! Between living and dying!” Does a borrower who missed a mortgage payment while out of the country for several weeks deserve a second look? How about a borrower who stepped away from their job for six months to care for a sick family member? Are these hopeful buyers truly unfit to be borrowers?

Add up the inches, and in this market, the difference between working difficult deals or letting them slide is not only staying alive, or breaking even, but thriving. Some teams wait for the cream to rise to the top of their lead pools. Crescenzo’s does the difficult, curative work required to actively churn up business from that backlog of leads.

“I really truly think this is a niche,” says Baker. “Nobody else is doing this. Nobody else is saying, ‘Builder, give me all your turndowns and let me see what I can do.’” Crescenzo calls myriad reasons for rejecting borrowers “all these real-life scenarios.” Attending to those “real-life scenarios” of preferred lender fallout, his team plays a game of inches they haven’t lost yet.

Never saying ‘No’ to a borrower sounds like the stuff of other film genres, like a horror picture involving a used-car salesman played by Edward Norton, or a crime-thriller exposing the grift of an unassuming accountant — also played by Edward Norton.

Embedded in Crescenzo’s team and now living just five miles from the Charleston home in which she was raised, Baker began a career in law before transitioning to real estate finance in 2012 due to the ample opportunities to buy properties in post-Great Recession short sales. 

Crescenzo moved to South Carolina around the same time, focusing on “one person and one phone call and one client, not blowing that account or opportunity,” he says. “People aren’t a number. They don’t want to be treated like a number or feel like a number.”

Baker recalls the challenge of adapting her operations experience to Crescenzo’s strategy of never saying, ‘No.’ When she leaned toward rejections, he pressed her to consider why that borrower could not qualify. “What things would need to change for it to work?” he would ask.

Everybody’s always looking for “an easy loan” or “perfect credit score,” says Jason Husted, a real estate agent and partner of Crescenzo’s who relocated to Charleston from New York in 2015. He founded his Keller Williams brokerage in October 2017. “We never get a turn down,” he says. “We either get a plan or a pre-approval.”

Despite having no local contacts, Husted excelled as a single agent in Charleston, closing 33 homes in 2018, 59 homes in 2019, 76 homes in 2020, and 104 homes in 2021. Lacking referral sources to lean on, he focused on helping buyers who had been turned down repeatedly by other real estate teams, meeting Crescenzo through a builder’s referral.

Twenty-seven of Husted’s first 33 transactions Crescenzo turned around, putting together a credit plan for the borrower to eventually close. Some files needed a co-borrower. Some required credit repair or rescores. Some borrowers needed to work additional shifts to show more (and more consistent) income. Other borrowers had to increase their 401k contributions.

“It’s not if, but when,” Baker says. “Maybe things aren’t going to work out for you right now on this lot or this house, but in three months or six months, you can definitely do this.” Striving for a plan or a pre-approval, and taking rejections off the table, is the operational philosophy underpinning Crescenzo’s strategy. Still, other borrowers need tough-love financial advice to align their budgets and ambitions.

“What’s worked for me is having those conversations, real conversations,” says Crescenzo. “We can break it all down and say, ‘Hey, listen, this auto payment is out of your budget. You shouldn’t be driving a car that was in Fast & Furious.’” Clients appreciate learning how the numbers work, and the breakthrough sounds like a borrower asking what their monthly payment will be.

Such hand-holding requires close communication with borrowers and coordination with referral partners. However, nothing guarantees a buyer’s loyalty after helping to improve their credit score or debt-to-income ratio. What helps are Crescenzo’s meticulous notes about clients’ birthdays, anniversaries, sick relatives, new babies, and the like. “You can see the look on their faces,” he continues. “They thought that whatever they came in with had to stay that way, and no one ever helped them.”

For typical home sale transactions, a buyer goes under contract and the deal closes in 30 days. Where a typical real estate team might have 30-45 days of business lined up, “we have six months of business lined up almost every week,” Husted says. Crescenzo’s team is now scheduling March 2025 closings. It may take three to six months to position a buyer to close on a home, but having a pipeline of those deals means Crescenzo and his partners can project earnings and business strategies two quarters ahead.

Harry Enquist has been selling newly constructed homes in the Charleston area for 25 years. Currently with DRB Homes, he remembers meeting Crescenzo 15 years ago. The community to which Enquist was assigned had sold only two homes in the past year. The buyers coming in had lower credit scores and incomes, and thus were getting turned down by banks.

“These are hardworking people that wanted to own a home,” Enquist remembers. “Phil said, ‘Just send me a couple of your files that have been turned down; let’s see what happens.’” When Crescenzo closed the first two, Enquist sent him more. They now have closed more than 400 deals together.

Eventually, Enquist’s buyers with credit issues were sent to Crescenzo, who put them on a credit plan. If the credit plan lasts six months, Enquist puts them under contract for a house that will take six months to build. If the credit plan is three months, he puts them on a house that is already framed. By focusing on the curative actions required by the borrower for approval, Crescenzo transforms today’s rejections into tomorrow’s closings.

Today, roughly 40% of DRB’s sales go through Crescenzo’s team, or Nation One more broadly. “The whole attitude that we have together is anybody that comes in, you can buy a home,” Enquist says. We just have to figure out when it’s going to be.” That attitude propels what he calls “the conveyor belt” of new construction business. “When we’re starting new homes, new buildings, and they’re already sold, that’s a pretty easy build.” 

People finally able to buy a home after receiving a string of rejections also tend to be the most secure under contract — and they give glowing referrals.

“We create so much more business from people that have been told that they can’t buy a home because of this or that, and now they’re actually buying a home,” Enquist says. “And then their friends are like, ‘How’d you buy that? We were told we couldn’t buy one.’ They come in as well.”

The further one gets from production, the more expendable one becomes, especially in a down market, believes James Essen, Nation One’s national director of sales and growth. Essen recruited Crescenzo while responsible for the growth in sales for the California-based APM’s eastern division — a territory covering 29 states. Crescenzo returned to Nation One in November 2023 with Essen in tow.

“He came to me,” Essen recalls, “and said, ‘Hey, I’m going to Nation One,’ and I was like, ‘Alright, well, I don’t really know what that means,’ and he’s like, ‘Oh, I misspoke. I’m not going to Nation One. We’re going to Nation One.’” Having been in the industry for more than two decades and hired “thousands” of loan officers, the opportunity to go with Crescenzo was “a unicorn opportunity,” he says. “When everyone else was struggling to do a fraction of what they did a year before, he’s continuing to grow 10%-15% year over year.”

Crescenzo’s focus on fundamentals fashioned him into one of the most knowledgeable people in the industry Essen knows. A common denominator between Crescenzo and other top producers Essen’s met, “they legitimately love mortgages and they love helping people get loans. It’s his hobby, like he just can’t shut it off.”

When APM stepped back from some of the growth projects it had been pursuing in 2023, Crescenzo saw the need to produce for a smaller lender that would allow his team to “break all the systems” and “question every single thing” about mortgages. Crescenzo had produced for Nation One from 2012-2020 upon moving to South Carolina. He’s a custom overlay, there.

“The understanding that he has with the owner of our company is, if we say, ‘Yes,’ that loan has to close,” explains Essen. For Crescenzo, his small team could have more impact at Nation One, which translates into greater operational control.

“To be able to say, ‘This is what’s happening. This needs to work like this and this needs to be done this way and it needs to be done this way right now.’ I have full control to do that,” Crescenzo highlights of enhancing his team’s reaction speed in a difficult market. “The bigger institutions have a difficult time doing that because it’s very expensive.” Greater operational control translates to cost savings on the production side.

The wisdom of his switch to Nation One shows in the success of the new model his team is developing. “We’ll probably break 400 units or really close in 2024,” Crescenzo projects. He hates sharing his numbers, thinking it tacky, but the industry keeps score. “With what I’m saving in the operational steps, some of the inefficiencies and time, I can go bring the business in.”

So he can operate from 30,000 feet, Crescenzo fields a team that is operations-heavy, including himself, Baker, and two veteran processors he calls, “strong enough to be underwriters.”

“A lot of times, the builder’s lender doesn’t say they can’t make it work until they’re less than 30 days from the closing day,” Baker says. The urgency required to save such deals demands operational soundness and efficiency. “When they put a file together, we know it’s going to be approved,” enabling the team’s one-touch approach to every file.

Specializing in deals that need either immediate salvaging or extended time and attention, Crescenzo’s business model is “very different” from those of her previous employers.

Day-to-day fulfillment and processing was run through the corporate office at her previous employers, limiting Baker’s impact as operations manager. “That was very frustrating for me as somebody who is, admittedly, a little bit of a control freak with that.” The loans she works now require granular knowledge of the underwriting guidelines and a direct line to the lock desk.

The number of management layers at APM, she says, increased friction for a team that thrives on speed and efficiency. Where it took a week to get through three levels at APM, one level in 24 hours is what she’s come to expect at Nation One. Their average number of calendar days from application to funding is 16-17 days. A quarter of their loans close in 12 days or fewer..

By working a diverse set of loans and trimming underwriting overlays to the bone, the expectation is that no one should touch the file more than twice. To “break all the systems” and “question every single thing” about mortgages, Crescenzo wanted to develop a process that traded on his reputation without diminishing it. A quicker review process, whereby Crescenzo “watches the gate,” allows him to assess the feasibility of every lead or application received.

“We’re just basically letting our processor own the file,” Essen says. “They know that a loan officer scrubbed it, they’ve reviewed it with Phil, and with Phil’s experience and track record, it’s sort of like having your big brother bring you to school.” No one will beat you up for passing along the file. “If we tell somebody in Charleston, ‘Phil Crescenzo said this loan is good,’ it’s like saying, ‘Hey, this guy’s a cash buyer. The money will be wired to your account next week.’”

While preferred lender fallout comprises anywhere from half to three-quarters of the team’s monthly volume, the calendar fills out with easier files, too. In fact, because their biggest builder client is having a “very down year,” according to Essen, the team has achieved a better loan balance, from four-fifths of their business being new builds to roughly two-thirds.

That better balance also reflects the rewards of the company’s reputation for closing difficult deals. The initial client on a deal may be the builder, but a buyer’s agent is attached in almost all of their transactions, Essen explains. Those buyers’ agents — like Husted — are sending more business. Further, as the company continues to perfect its model, Essen envisions potentially  “franchising this out in other markets … continuing to target the same niche.”

Those are markets other originators could begin to tap for builder business. But, knowing when to compete and when not to compete makes Crescenzo’s group unique in its market. His team does not threaten builders’ in-house lenders because they punt those loans. “If it’s a loan they can do, we’re going to tell them how to do it and send it back because it would be a better deal for the client. If it’s a loan they can’t do, then we’re going to kill it,” declares Essen.

Befriending Builders' Sales Reps

Though not many originators have figured out preferred lender fallout, Crescenzo’s team does not enjoy the niche by itself.

Major Singleton is a mortgage broker originating in the Dallas-Fort Worth area. After 23 years in the military, he retired from the U.S. Navy Reserve in 2021 as an Executive Officer at the Navy Operational Support Center in Pearl Harbor, Hawaii. Maintenance and drinking water issues on base prompted Singleton to invite a mortgage company to educate his sailors on how they could finance homes off base.

He began his mortgage career soon afterward, in late 2020, with American Pacific Mortgage Corporation (APM). “I was double-dipping in mortgages and running my command as executive officer, and I did extremely well.” In fact, the day scheduled for Singleton’s retirement ceremony had to be changed because he had three closings. Now with Edge Home Finance, Singleton exited retail in late 2021 because he was “getting his teeth kicked in” by brokers.

“Your ‘in’ with the builder is not with the developer or the big guy at the builder or whatever. Your relationships come from the actual sales reps.” Courting those sales reps, he says, is not so different from courting real estate agents. They also enjoy Tuesday morning coffee and donuts. Emphasize your value to these reps: Brokers can close the deals that preferred lenders cannot.

Builders open a lending arm to have a secondary profit center, Singleton explains. “They’re not taking risk that is going to put the company in jeopardy,” such as offering unconventional loans or financing, or widening the credit box. “They’re less experienced than your independent mortgage broker … They don’t have access to the programs many other lenders do.”

Commenting on social media posts or driving by build sites to introduce himself helps Singleton forge these relationships. He visits sales reps’ offices when he expects they will not be busy with clients to ask questions about current and future projects, available inventory, price points, and the application process. To excel in this niche, brokers must learn the ins-and-outs of the new construction business.

Fostering relationships with multiple reps for the same builder grants Singleton access to different build sites. Because location and incentives make the difference for most buyers, access to a variety of build sites allows Singleton to match those preferences with his borrowers, while expanding his referral network for agent-partners.

Besides creativity, a broker’s greatest value-add is availability. A preferred lender typically works from nine to five. Most do not answer the phone on the weekend, says Singleton, who sees lower FICOs, immigrant borrowers, bank statement loans, and P&L loans for business owners and the self-employed. When a sales rep calls on a Saturday afternoon with a family interested in buying, Singleton sets the hook. “I’m like, ‘Hey, let’s put them on the phone. Can you put them on speaker?’” He proves his knowledge and availability to the borrower and the sales rep, who tells the preferred lender, “‘Your guy’s not available. This guy’s answering all my questions.’”

Working builders’ most difficult files, sometimes all he earns is his reputation. “I call them ‘Jesus loans’ because the only way you’re getting paid is if Jesus sees you doing it,” Singleton jokes. Still, closing the loan is paramount. Singleton recalls spending 60 days to close a new construction bank statement loan for a family in political asylum. He found just one lender willing to take the loan. “The sales rep calls me up and he’s like, ‘I gave you a hard time about getting this closed and everything, but the reality is you’re the only person that could have closed this.’”

One question Singleton always asks builders’ sales reps is how they get paid. Some reps receive half of their commission when they go under contract, while others do not see a dollar until the transaction fully closes. If the deal sours and Singleton’s phone rings, he knows a paycheck is on the hook. “If they fall out of contract, they have to pay that back to the builder because they didn’t close on that deal. They don’t get the other half until the deal closes.” Be tactful, but be strategic. Don’t ask how much they make — ask how the rep is compensated.

Any broker could do what Singleton does, he believes. Because only 10% of brokers actually will, he does not hesitate to share tips and tricks about his process. Singleton has even been solicited by sales reps to be their preferred lender. But, he has little interest in sitting in an office or losing his entrepreneurial edge. Through 2024, Singleton’s production has been roughly 25% new construction. That share is likely to grow as he sticks to a method proving successful.

“Many people do things just long enough for it not to work,” he believes. “Honestly, I probably have done 20 meetings with builder reps in the past six months because you have other business that you’re doing. I found a very good connection with two of them, and those two have referred me to other builder reps at their build sites.” One of them is a top producer at the build site because he leans on Singleton for tricky loans.

– Ryan Kingsley