For years, United Wholesale Mortgage has claimed the mantle of a missionary, preaching the faith of mortgage brokerage. And in doing so, it’s done a lot of good: it’s built tremendous support systems for brokers, injected a sense of pride in a sector that was decimated after the Great Recession, and worked to bring in new brokers to strengthen the ranks of the originators.
But in March, with one personal edict, UWM CEO Mat Ishbia decided to make it clear that the company is not supporting mortgage brokerage. Instead, it’s supporting Pretend Brokerage.
Real brokerage is based on freedom of choice – for consumers and brokers. Entrepreneurs, who want to be their own boss and chart their own fate, decide to open a brokerage. They tell consumers they’re a better option than retail operations, because they can offer a wider range of options, from multiple companies. No brokerage offers loans from every wholesaler. But it’s the broker’s choice of which companies’ offerings they’ll represent.
Pretend Brokerage, on the other hand, is when the broker isn’t the final arbiter about which companies it wants to do business with. Pretend Brokerage is when one wholesaler tells the broker who they can and can’t do business with. Whether that’s 70 companies or two doesn’t matter. If a broker’s choice is strangled by one company, then it’s no longer a brokerage. It’s a retail branch where the local entrepreneur is taking all the risk.
DICTATING TERMS
When Ishbia announced that UWM would no longer work with any brokerage that did business with Rocket Pro TPO or Fairway Independent Mortgage, he claimed to be acting in the best interest of the broker community. But it’s not supposed to be up to him to make that decision – that’s the province of each individual broker.
For a couple of years, Allen Middleman, an EVP at Freedom Mortgage, hit the road with a series of conversations with mortgage brokers. He would always tell them that, if he were a broker, the first thing he would do was sign up with Quicken Mortgage, Rocket’s prior name. Quicken was a prodigious advertiser for its retail products, but brokers could turn that to their advantage. They could show consumers who were entranced by the Quicken marketing magic that they, too, could offer everything that Quicken could, but they could also offer more. And in that way, they could prove to borrowers that they were the best choice.
That’s a pretty sharp piece of advice, trashed by UWM’s edict.
AN IRON GRASP
Ishbia asserts that UWM is only taking a stand against two companies, and that brokers still have lots of choice. Putting aside the appropriateness of that action, there is nothing that keeps UWM from continuing to whittle down the list of what it considers to be acceptable competitors. Ishbia has said that UWM doesn’t plan to distance itself from other lenders, but certainly hasn’t made any binding promises.
Some brokers don’t believe that UWM will, when it strikes its fancy, act with further malice, or take other action to hurt brokers. But there’s a long game here, and UWM is very good at playing it.
Right after Quicken blew up the industry by introducing its Rocket Mortgage app (“Push Button. Get Mortgage” was the catchy slogan), UWM decided to go on a great tech offensive. It was already offering some marketing products to help brokers. Now it unveiled a whole new mortgage application app – called Blink – that any broker signed up with it could use. And, its leaders promised, it could be used by brokers to take an application even if those loans didn’t wind up at UWM. Those leaders said the company just wanted to be good stewards of the brokerage community.
They also rolled out much more aggressive marketing support – email newsletters that could be sent out to clients, commercials that could carry their brokerage’s brand, introductory videos and much, much more, including a CRM system the brokers could use for all their originators and products, and all free. When brokers who had access to all this didn’t take the time to sign up for it voluntarily, UWM took the choice away by automatically enrolling them as soon as they were approved to work with UWM. It was a move that telegraphed two years ago that UWM would force brokers to do business its way when it decided what was best.
That move presaged its current stance. In one statement last month, Ishbia asserted that he had no interest in letting brokers have access to his company’s tremendous technology if they were going to also support Rocket and Fairway. For thousands of brokers who now had their entire marketing program and client database in UWM’s hands, it was a situation that was intolerable: either accede to UWM’s terms, or face losing their entire business infrastructure overnight.
BAD MATH
At the heart of UWM’s stance is an assertion that the brokerage channel is hurt by having Rocket and Fairway in the game. But neither UWM nor any of the brokers or the single trade group that backed this play have shown one piece of evidence to back up that claim.
In fact, all the evidence points the other way.
In 2011, mortgage brokers accounted for just seven percent of the market share of U.S. mortgage originations. Last year, brokers had upped that to well over 20 percent.
As Rocket, especially, has ratcheted up its outreach to brokers, it has also adjusted its business practices and technology offerings to meet brokers’ market demands. That has pushed Rocket’s share of the wholesale channel to the number two slot, just behind UWM’s lead. But if Rocket was so bad for brokers, or the brokerage community as a whole, the sector’s market share wouldn’t have gained the incredible traction that it has.
FUTURE STATE
At the end of the day, UWM’s power play isn’t being done in the best interest of the broker community; it undercuts brokers’ free choice and undermines their ability to actually offer the best product to consumers – which is why consumers come to them in the first place. But it does serve to bind brokerages to UWM as indentured retail branches, while stomping a competitive boot heel on the one company big enough to challenge UWM’s market dominance.
What’s unbecoming, especially, is that UWM is a massive success story, because it has competed based on superior service, tremendous product and great client support. It has no need, and no right, to try to limit broker choice. But it’s ignoring that, and in doing so is showing that it’s putting its own interests ahead of the brokerage community, regardless of the spin it’s trying to cast.
Some brokers may shrug, saying they don’t care because they love doing business with UWM. But that’s today. Tomorrow, or next month or in three years – whenever UWM sees it’s to its advantage – the rules will change again, and the next time brokers won’t be able to be so sanguine about the outcome. Because UWM is their new boss.
