The low interest rates we’ve experienced over the past few years have made it possible for millions of Americans to buy new homes, refinance properties, and pull out some equity to ease the pinch caused by the lockdowns.
Families have been able to increase their liquidity and pump billions into the economy when it was desperately needed. Consumers, real estate agents, lenders and mortgage brokers all have benefited. So Thursday’s speech via Facebook by United Whole Mortgage CEO Mat Ishbia, in which he delivered essentially an “ultimatum” to his company’s brokers and partners, seems odd.
Ishbia told brokers they had to make a choice — either work with UWM or else. Anyone working with Quicken Loans/Rocket Mortgage and Fairway Independent Mortgage wouldn’t be getting any more business from him.
Some might call that the hard sell. Others might say it’s the kind of threat that could provoke intervention by federal regulators looking for evidence of restraint of trade. Either way, it’s a bad deal for consumers who have or who planned to capitalize on the current low rates.
Ishbia’s play didn’t go over well among industry observers. Mortgage Bankers Association President and CEO Bob Broeksmit issued a statement that said, “Consumers are best served when they have choices created by a robust, competitive market that offers a multitude of loan prices, products, and service levels. Our mortgage market is extraordinarily competitive, with thousands of lenders, multiple delivery channels, and varying business models. MBA does not condone activities designed to thwart competition in the mortgage market and limit loan options available to borrowers.”
What Ishbia wants amounts to a “publicly traded nonbank,” Inside Mortgage Finance reported, “altering its broker contract, telling third-party salespeople if they violate this ‘representation and warranty’ they must pay the wholesaler damages ranging from $5,000 to $50,000.”
Chris Whalen of Whalen Global Advisors LLC, a frequent contributor to the National Mortgage News, said Ishbia’s demands were a direct result of “mortgage lending volumes slowing” forcing firms to fight over brokers and production.
“Both firms are very dependent upon loan refinance transactions and thus buy loans from mortgage brokers. Rocket Mortgage is best in class at refinance, while UWM is an upstart and bottom feeder in terms of production,” Whalen said.
UWM is “the monkfish of mortgage lending,” Whalen said, adding it compared in some ways to Countrywide Financial, a firm that played a key role in the sub-prime lending crisis more than a decade ago “but with the added fuel of the Fed’s purchases of mortgage paper.”
The story, Whalen predicted, “will end in tears” and placed the blame squarely at the feet of Federal Reserve Chairman Jay Powell and the Federal Open Market Committee. Perhaps, but what is certain is that by trying to force third-party brokers to act as UWM employees, Ishbia is guaranteeing home buyers and mortgage brokers will suffer. The policy he is attempting to put into place will restrict competition, despite the launch in January by Quicken/Rocket of a new national mortgage broker directory backed by an investment of $100 million on its website.
Ishbia’s tactics undermine the goal of mortgage brokerages: to identify the lowest interest rates for borrowers and streamline the mortgage process. With Rocket — an industry leader in the mortgage space — now stripped out of the Rolodex of many brokers, consumers almost surely will be required to pay more.
That will cause the housing market to slow down at a most inconvenient time for buyers, sellers and the country as a whole.