About 65% of the 4,600 independent mortgage brokers agreed not to do business with Rocket Companies Inc. and another competitor, missing the expectations of the CEO of United Wholesale Mortgage Holdings Corp. Mat Ishbia to enlist 80% or more.
The Pontiac Lender issued an ultimatum earlier this month saying he will no longer work with brokers who issue loans through Detroit-based Rocket and Fairway Independent Mortgage Corp. in Wisconsin.
The 4,600 brokers who worked with UWM and Rocket or Fairway had until Monday evening to accept a rider to continue working with UWM. About 3000 accepted; UWM declined to provide a list of names. About 400 brokers refused the addendum and 1,200 others did not respond. UWM will close pending loans with them, but will not initiate new loans, a company spokesperson said.
“Not responding doesn’t mean they haven’t signed up – we’re still in communication with those who haven’t accepted or some clients are out of town, and that would be a very bad assumption to think that anyone who has not yet agreed to accept will not accept, “the spokesperson said in a statement.
“We would expect about 50% of the undecided to agree, but regardless, out of the 12,000 clients we have, about 85% + will all agree with UWM.”
In total, UWM now has around 10,400 brokers, up from 12,000 when the ultimatum was issued. UWM needs partner brokers because it is the only way the business can create mortgages. It is the largest lender in this wholesale channel, which accounts for over 20% of annual mortgage volume in the United States. Rocket and Fairway, on the other hand, also have direct-to-consumer retail divisions.
Rocket claims that the ultimatum is anti-competitive and removes choice, which is the goal of the broker channel, and that “thousands and thousands of brokers” have told Rocket that they will not agree to the terms of UWM.
Austin Niemiec, executive vice president of Rocket’s wholesale Rocket Pro TPO business, had urged brokers not to respond to the rider, which requires brokers to pay $ 50,000 or more if they sign up and then start to pay. take out a loan with Rocket or Fairway.
Experts say the ultimatum is unlikely to affect consumers looking for the best rates given the competition in the industry.
“I think that doesn’t mean much,” said Matthew Roling, assistant professor of finance at Wayne State University who previously worked for Rocket Mortgage-affiliate Rocket Ventures from 2012 to 2017. “Service, pricing and the convenience of get consumers will not be seriously affected by this. “
UWM shares closed 0.71% higher on Tuesday, outperforming major stock indexes. Rockets fell 3.1%.
UWM said Rocket and Fairway’s business practices threaten brokers and may leave less choice for buyers and owners. He accused Rocket of trying to eliminate brokers by recruiting real estate and insurance agents as loan officers to create loans for Rocket themselves, enticing them with paid licenses and financial bonuses. These agents are common referral sources for local brokers. Fairway, UWM said, hires loan officers away from brokers.
“I have received hundreds of calls and emails from mortgage brokers across the country and have been blown away by the positive response we have received, as well as the large number of stores that have shaken our arms. because they thought it was the right thing to do, ”Ishbia said in a statement. “We’re going to be able to view this as a pivotal moment that has helped catapult the growth of independent mortgage brokers. “
Last year, UWM closed $ 182.5 billion in lending volume, a 69% increase from 2019, despite moving from the country’s second-largest lender to fourth. In 2020, Rocket generated over $ 320 billion in total loan volume. Last week, it disclosed $ 97 billion through its Rocket Pro TPO wholesale channel.
Rocket says 90 realtors use their Rocket Pro platform to create loans and turn down paying agents for referrals. The company is investing $ 100 million this year in its brokerage technology and millions more to promote its wholesale channel.
Last week, the company said broker loan registrations had increased 40% per day since UWM’s ultimatum and Tuesday was set to be one of the best 10 days in history. of the society. Rocket is adding several hundred more brokers to its TPO platform this month, he added. Its partners have grown from 3,000 to 10,000 over the past three years.
“We understand that the power of a mortgage broker is choice and independence, and we would never ask them to sign a loyalty pact,” Rocket spokesman Aaron Emerson said in a statement. . “The results speak for themselves.”
In a statement released last week, Fairway, the nation’s 12th largest lender, did not respond to UWM’s accusation, but said it supports brokerage decisions to choose which lenders they want. work.
Other lenders like Ann Arbor-based Home Point Capital Inc., the third largest wholesale lender behind Rocket, could benefit. Home Point CEO Willie Newman said on an earnings call last week that the company had attracted increasing interest from brokers. Home Point shares closed 1.51% lower on Tuesday.
“We think we’re in a great position to be that next pick,” Newman said, “if it turns out that they only have one of the other two biggest lenders to work with.”