In the wake of an ultimatum that mortgage brokers couldn’t use Rocket Pro TPO and Fairway Independent Mortgage while still sending loans to United Wholesale Mortgage, Mat Ishbia declared victory.
In a statement issued after Monday’s deadline, the president and CEO of UWM said that more than 10,000 broker shops have pledged to no longer work with Rocket and Fairway, whom he said have been working behind the scenes to destroy the broker channel.
“I’ve received hundreds of calls and emails from mortgage brokers across the country and have been blown away at the positive response we’ve received, along with the sheer number of shops who have locked arms with us because they felt it was the right thing to do,” Ishbia said. “We’re going to be able to look back at this as a pivotal moment that helped catapult independent mortgage brokers’ growth.”
However, such a declaration leaves out important context. Before Ishbia issued his ultimatum on March 4, UWM worked with roughly 12,000 broker shops. Though Ishbia initially said the edict would force about 3,000 brokers to make a decision, UWM later said 4,600 broker-owners were affected. Of those 4,600, UWM said about 3,000 accepted the addendum. About 400 declined to sign and 1,200 never responded, which means they are not able to send new loans to the Pontiac, Michigan-based lender.
Critics of the move say that roughly two weeks after the ultimatum was issued, UWM now has 1,600 fewer brokers that can send loans to the mortgage giant, which does more purchase business than any other company in America. While Rocket and Fairway can generate business in retail and consumer direct channels, UWM’s path for growth relies exclusively on increasing the number of brokers and cementing more of them as clients. The broker channel is currently around 20% of the overall mortgage market. Ishbia wants it to be one-third of the market by 2025, with UWM at roughly 50% of marketshare in wholeasle.
Like UWM, Rocket, easily the biggest mortgage lender in America having originated about $320 billion last year, expressed similar jubilation on Tuesday.
“Rocket Pro TPO has already grown its market share since UWM’s announcement and will continue to do so in the weeks, months and years ahead,” a company spokesman said. “More than 9,000 brokers stood up and said no to UWM’s ultimatum. They see the writing on the wall and are not signing up to become a controlled loan branch of UWM. In addition to our thousands of tried-and-true broker partners, we had hundreds of new brokers submit an application to partner with us yesterday as they chose freedom over mandates. In fact, two of the largest broker owners who previously did no appreciable business with our company rejected UWM’s addendum and are now building a relationship with Rocket Pro TPO.”
Who gained more than they lost in this skirmish? Are there any winners? It depends whom you ask.
100% wasn’t UWM’s target
Ishbia knew he was never going to get 100% of the 4,600 brokers to sign the addendum; he was hoping for 80% to sign the addendum. UWM believes that at least half of the 1,200 who haven’t answered will eventually agree to not work with Rocket and Fairway, pushing the figure even higher.
In Ishbia’s view, he needed to do something bold to hobble Rocket and Fairway, whom he believes represent an existential threat to the mortgage broker and therefore, the future of his business. In that regard, UWM believes the gambit has been a success. Ishbia now has assurances that 3,000 or more brokers who did business with Rocket no longer will.
Ishbia, whose battles with Rocket are becoming legendary, has accused his arch-rival of paying real estate agents to become loan officers, which cuts brokers out of the equation. (Rocket denies the accusations and says only 90 real estate agents originate their own loans with them.) And Fairway, Ishbia said, has tried to poach LOs from brokers to join Fairway’s retail operations. (Fairway declined to comment on the accusation, though it released a statement last week saying it supports a broker’s right to choose which lenders it partners with.)
“Listen, everyone can do what they want, but here’s my perspective: I’ve got your back. UWM isn’t adding any other lenders,” Ishbia told brokers last week in a video. “These are the two we are focused on. Is this legal, am I allowed to do this? Of course it’s legal. We’re saying we’re only going to partner with people that are all-in. And if you’re all-in, our definition is you’re not working with the enemy of the broker channel.”
Ishbia has likened the struggle to the National Association of Realtors not treating Zillow as a threat to real estate agents. “In the same type of way, we’ve got your back and always will,” he told agents. “This decision was made for the greater good of the broker channel…we’re not telling you what to do. It’s your choice, your option. We’re basically stating our business plan, our philosophy, which is ‘don’t help the enemy of the channel.'”
Numerically, Ishbia has a lot of support, particularly among the contingent of “all-in” brokers affiliated with AIME.
“You’d have to be out of your mind to side with Rocket in all this,” one Midwest mortgage broker-owner told HousingWire. “Or you’re so blinded by the money right now and don’t think about the future. It’s like, they’re literally killing your business, day by day. Sending them loans is like the slowest suicide mission ever.”
Rocket retains some big partners
The biggest brokerage firm up for grabs was undoubtedly Thuan Nguyen’s LoanFactory, headquartered in San Jose, California. Nguyen himself was the top loan originator in the broker space in 2020, personally originating over $1 billion, the majority of which were refinancings. Last year, his brokerage directed roughly $3 billion in closed loan volume to Rocket Pro TPO, UWM, Homepoint (a pure-play wholesaler), Carrington, Sprout, Kind Lending and a few other select lenders.
He’s also expanding. Nguyen, who also licenses and sells his own proprietary technology to broker shops, has massively increased his footprint. LoanFactory outposts are now in 20 states.
Nguyen told HousingWire this week that it was a difficult decision, not one he wanted to make. Forced to choose, he went with Rocket Pro TPO. Given how much business he did with both lenders, he was in a no-win situation.
“Some MLOs and branch managers are not happy,” he said. “It creates a lot of internal issues.”
Rocket claims that it retained 22 of its top 25 broker partners. Those large players are critical to Rocket’s goal of expanding market share in the broker channel, which is a better avenue to win purchase business as refinancings wane.
Other big lenders that used UWM, Rocket and/or Fairway that elected not to sign the addendum include Charlotte-based Lemonbrew, a tech-heavy mortgage brokerage that is expected to do over $1 billion in originations this year; LoanPronto, another North Carolina-based lender that’s among the country’s biggest mortgage brokerages. California-based firms LoanMonkey and Preferred Financial Group also declined to sign the addendum.
HousingWire couldn’t immediately determine if Arizona-based Barrett Financial Group, one of the nation’s top brokerages, elected to sign the addendum, which stipulates that any broker could be penalized as much as $50,000 in violations per month. UWM and Rocket both declined to name the firms that either signed the addendum or declined to sign.
UWM still has many heavy-hitters who have sworn off using Rocket and Fairway: C2 Mortgage and Nexa Mortgage. It also pulled in Jay Shalaby’s E Mortgage Capital and United Wholesale Lending as part of the ultimatum.
Still, many large brokerages resented being forced to make a decision and deal with the fallout. Some said they believe they’ll lose LOs.
“I wasn’t going to let someone with his own agenda strong-arm me,” one top broker-owner who didn’t sign the addendum told HousingWire. “If you allow that to happen once, who knows what they’ll do in the future? In no universe does this stunt by Mat help the broker channel.”
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