The effects of UWM’s brokerage policy could be very damaging

This month, United Wholesale Mortgage took the industry by surprise when she said she block mortgage brokers to do business with the company if they have done business with one or the other Quicken Loans or Fairway Mortgage. With this announcement came an amendment to the UWM broker contract, taking note of significant financial penalties for violating this new policy.

I was amazed, frankly. I met UWM CEO Mat Ishbia a few times and quickly appreciated his competitive personality. He built his business from scratch, take it in public and ring the bell at NYSE. It really is a phenomenal increase, something that rarely happens in any business. Likewise, I have come to know those in leadership positions at Quicken and Fairway and, without a doubt, tenacity and competitiveness are also at the heart of their success.

Competition makes the nation’s mortgage industry thrive and provides the consumer with the best options, as competition will generally lead to lower costs and higher levels of service. Whether bank or non-bank, lenders or brokers, retained or released services, options for consumers and the competitive market generate the best results. Conversely, some westernized economies are dominated by only a few lenders, leaving a much less optimized mortgage market. There is no doubt that the vibrant state of the US mortgage industry drives the best options and the consumer experience.

Although I made a comment on social media about this policy announcement, I was pretty quiet about the rest. I understood, frankly, that these companies all had good legal counsel and that they would respond in their own way to this very unusual policy statement. But over time, I just can’t let go.

Maybe it’s because I served as a regulator before, or maybe it’s a reflection on my role as the head of the largest trade association in the industry. Frankly, my reaction might just be several decades I have worked in the industry – starting as a loan originator and eventually going on to key positions in a few large housing finance and mortgage companies in retail, wholesale, secondary markets, l real estate and government. My reaction today stems from a position of relative neutrality. It’s not about taking sides, it’s just an observation on behavior and slippery slopes.

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And yes, as I am mainly retired but I consult several firms in the mortgage field, I also remain active in mortgage policy and it is from this seat that I make these remarks.

In the days following the announcement, I observed a variety of unhealthy responses for an industry that thrives on its competitiveness. I’ve been in this business long enough to see lenders thrive and then fail. The dominance that a business can enjoy for a while can quickly erode. In all the countries, WAMU, Wachovia, Lehman, Home savings, Bank of Nations, ABN Amro, National city and so many others who once dominated are now gone. As a mentor in my career once said, “You never have market share, you just praise it.”

Mortgage brokers are a model that gives consumers choice. The message is pretty clear and has been over the years: a broker is not beholden to any particular lender and can therefore offer a much broader set of options to the consumer. Forcing a broker not to deal with a particular wholesale lender because of their competitive practices would make me wonder if that broker really offers the best set of choices to provide the most optimal options. After all, UWM won’t always have the best price or the best service. Although they are currently very good at what they do, they do not provide the best products for all consumer needs all of the time. No lender does.

Take the worry of fair loan for a minute. Is it possible that Fairway or Quicken sometimes have more flexible underwriting guidelines for first-time borrowers? And if the borrowers are minority applicants, are there any equitable lending implications to consider? Should regulators change the disclosure requirements for brokers to include a disclaimer for any wholesale lender that they are contractually bound to include as options to a borrower?

The conundrum here is that UWM may have stepped on the proverbial slippery slope. Imagine if Coca Cola said they wouldn’t sell you their soda if you bought Pepsi, or if United Airlines do the same if you were flying American? In my 38 years in this industry, I have never seen a policy implemented that penalizes you financially for doing business with the competition.

But UWM was smart when they said it’s about recruiting, claiming that Quicken and Fairway were recruiting their LO intermediary customers. But, seriously, is that really the point? Everyone is hiring all the time across all business models. Brokers are constantly recruiting bank and non-bank LOs. Banks hire non-banks and brokers, non-banks hire brokers and banks, etc. It really is an absurd argument.

Adding to the illogical element of this attempt at justification, the industry as a whole knows all about the UWM-Quicken attacks that have been going on for years now.

Whatever the intention behind this policy, the effect is potentially very damaging. If other wholesalers did the same, the whole philosophy of the broker could be threatened. Brokers who align with UWM policy simply recognize that they are almost equal to becoming a retail loan officer for a single wholesaler in a monoline way that is not too different from working for a bank or a banker. independent mortgage. The fundamental value proposition of the broker’s promise – that they offer more choice and be able to select the sources of mortgage financing that offer the best service and the best price – falls away when forced to choose sides. .

So I decided to comment. Everything here is my opinion, but I warn everyone in this industry to remember that no lender controls a mortgage market, and if they do, it is not for long. The attempt to restrict a competitor’s trade through the threat of financial sanction is a step that crosses the threshold of fair competition and could ultimately put the consumer at risk of not really having access to the best options on the market.

All of these lenders are currently very successful and are led by competitive and tenacious management teams. But the dilemma now is whether there should be appeals to regulators demanding more disclosure. After all, lenders must disclose affiliate business agreements. Considering the UWM’s action, perhaps they should now also be required to disclose unaffiliated relationships. If not, how can consumers be sure they really have access to a wide range of options when choosing a mortgage lender?

In the end, that too will pass. Lenders will find a way around this weird and awkward political announcement. But in the short term, he forced the country’s brokers to choose sides, something that is deeply unsettling from where I stand. We need to encourage competition and lenders should win on substance. Protecting market share by prohibiting brokers from working with competitors is bad policy and none of the arguments for it have merit in my mind.

Hopefully this is a one-time political action and not something that spreads. If so, I would expect others to be more adamant in calls for regulators to intervene, as consumer experience and options should prevail over attempts to run the business.

This column does not necessarily reflect the opinion of the editorial staff of HousingWire and its owners.

To contact the author of this story:
Dave Stevens at [email protected]

To contact the editor responsible for this story:
Sarah Wheeler at [email protected]

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