A year ago, mortgage originators were among the busiest professionals in town. Today, they might just be the slowest. Between record-low pandemic-era interest rates and a massive swell of buying activity in northern Michigan, mortgage loan originators had plenty to keep them occupied a year ago.

“If we were at a 10 a year ago (in terms of mortgage loan activity), and somebody said, ‘Where are you right now?’ I’d say we’re probably at about a 3,” says Mike Nagy, vice president of mortgage lending for State Savings Bank. “In terms of business volume in our industry, it went from drinking water from a fire hose to trying to sip a frosty through a cocktail straw.”

While the pandemic was a wild ride for most, mortgage lenders were booming the entire time.

Record-low interest rates were driving a frenzy of refinancing activity. Rates were attractive throughout 2020 en route to an all-time low of 2.65 percent in January 2021 for a 30-year fixed mortgage. And as the economy came out of its initial pandemic-induced tailspin, buying activity hit a fever pitch. The record-low interest rates; the fact that people had just spent months at home discovering that they wanted or needed more living space; the explosion of remote work that unshackled countless people and families from major metropolitan areas; the seed of a housing inventory crisis, first planted during the Great Recession, that only worsened amidst stay-at-home orders; global supply chain kinks; and massive labor shortages.

“I was never busier than I was in 2020 and 2021,” says Dave Durbin, mortgage loan originator at West Shore Bank. “And I've been doing this for 18 years.”

Nagy agrees.

“That 2021 market was about as wild as any I’ve ever seen,” he says, having been in the business for more than 40 years. “The only other time that was close was in the '80s when we were still trying to come out of that period of historic-high double-digit rates. When we finally broke under 10 and got into the 9s, and then the 8s, and then the 7s, you’d often be refinancing the same person three times in the space of two years.”

Durbin says every mortgage lender knows that periods of feast are always followed by periods of famine.

“Even when you get that busy, you know it’s not going to last forever,” he explains. “That’s just how it works. So, for all those 14-hour days and seven-day weeks you worked in 2020 and 2021, and into 2022, everything that you pushed into a corner – whether it's work-related, personally, whatever – you get to address those things (when the market cools).”

And cool the market has. Mortgage rates peaked at more than 7 percent in November 2022 and are sitting at about 6.5 percent right now – more than double where they were at the beginning of 2022.

That shift has essentially stalled refinancing activity and has slowed buying and selling, too – with northern Michigan’s small inventory of available homes exacerbating the latter issue.

The result, for mortgage lending professionals, is that the past six months have been a relatively “boring” time.

“I’m definitely taking this time to educate myself on different products, and on what’s coming down the pike that we think customers are going to be looking for,” Durbin says.

Durbin predicts that the construction loan will become a component, due to the country's awareness of northern Michigan and the subsequent shrinking of existing home inventory.

"We're already seeing that, actually, and with the purchases of vacant land, people are applying for construction loans," he says. "That seems to be a higher percentage of business. Those loans are more time-consuming, and when they come through, they give us a lot more to do (than a traditional mortgage), so it’s important for us to sharpen those skills.”

Construction loans aren’t the only piece of business that's growing even as more traditional services remain slow. Mary Burgin, a mortgage loan originator for TBA Credit Union, confirms the general assumption that traditional mortgage refinancing is virtually nonexistent right now. But she also says the drop-offs in refi and buy activity have been balanced out slightly by “a steady influx of home equity loans.”

“A lot of people refinanced back when the rates were low, so they don’t want to touch that rate they have,” Burgin says.

Mortgage lenders aren’t just using this lull in the market to educate themselves, though, or to get more comfortable with less common products in their industry. For Nagy and his team at State Savings Bank, one of the big focuses at the moment is on educating others through "how to buy a house" classes they give to high schoolers.

“Because they don't do that much in schools anymore, and who better to teach it than people who've been doing it for 40 years?" he says. "You can’t just sit in your office and wait for people to come to you. You need to get out in the streets. There are so many opportunities out there to build awareness and relationships around what we do.”

Burgin and her team also get out in the community, hosting several first-time homebuyer education courses in conjunction with the Northwest Michigan Community Action agency.

“...(T)hat's a really good opportunity to educate buyers about what to expect from the mortgage process," she said.

They also visit with local real estate offices to educate new agents on what to expect on the mortgage side of things.

Of course, even though mortgage experts find ways to busy themselves during lulls, they’re all ultimately waiting for the next boom. When that boom will come, Durbin admits, is anyone’s guess.

“Right now, it looks like by the end of 2023, rates will have dropped to somewhere in the low 5s,” he says.

With that drop, Durbin says homeowners could be on the hunt to sell and buy again, but that in a market like Traverse City, it's hard to predict.

Plus, construction has its limitations, because builders are limited in number and booking up, he says. "So, we have this bottleneck in our area right now, and that could keep housing prices high."

This is an excerpt of a longer feature that appears in the March Traverse City Business News. To read it in its entirety and much more, subscribe here.