by Brian Brady
Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL
The dynamic CEO of United Wholesale Mortgage, Mat Ishbia laid down an ultimatum to the mortgage broker channel today. Ishbia said, in a conference call with members of the Association of Independent Mortgage Experts (AIME), that mortgage brokerages who choose to fund loans through Quicken’s Rocket Mortgage will no longer be approved with United Wholesale Mortgage (UWM). I believe he laid down the same ultimatum with competitor Fairway Mortgage.
WATCH: What is the difference between a bank, lender, and mortgage broker?
The bad guys
Let’s start with this: Rocket Mortgage is to the mortgage brokerage channel what Zillow is to the real estate industry– a predator. Like Zillow, Rocket Mortgage approached the mortgage brokerage channel with great pricing causing many mortgage brokers to send loans to it. Its service stinks, its underwriting department isn’t knowledgeable, and it “cherry picks” all of the best borrowers. More importantly, Rocket Mortgage starts marketing to the mortgage brokers’ customers the day after they close their loan, attempting to render the originating broker useless. Rocket Mortgage sets itself up as a direct competitor to the mortgage broker the minute it pays the mortgage broker for the loan origination. Additionally, Rocket Mortgage solicits the real estate agents involved with the transaction to become part-time Quicken Loans mortgage originators. Ultimately, Rocket Mortgage is following the Zillow model and trying to eliminate real estate agents and mortgage brokers from the transaction.
Economies of scale let tech-centric companies like Zillow and Quicken compress margins and deliver lower costs to the consumer. That’s competition and competition is good, right? Wrong. Quicken’s retail lending arm is almost always more expensive than an independent mortgage broker and neither Zillow nor Quicken have the local expertise and fiduciary duty a local real estate broker has.
The good guy
UWM is mortgage broker-centric and Mat Ishbia is a cheerleader for the independent mortgage broker channel. UWM’s predecessor, Shore Mortgage was founded by his father, Jeff Ishbia in the mid 1980s. Mat was a member of Michigan State’s NCAA Championship basketball team in 2000 under coach Tom Izzo. After graduating Michigan State, Mat went to work for UWM as a wholesale account executive and, within a few years, took the helm at UWM, then a wholesale lender predominantly focused on FHA loans funded through the wholesale broker channel. The old saw “when preparation meets opportunity” came to fruition when the mortgage crisis of 2007-9 hit– Mat Ishbia was prepared and capitalized on the opportunity.
By 2014, UWM was the top wholesale lender, a perch which it’s defended since then. It wasn’t enough to be the best wholesale lender for Mat. He grew his business by committing ONLY to working through independent mortgage brokers (rather than purchasing loans from retail lenders) and, when he reached that plateau, he decided to grow the channel rather than betraying his commitment. Mat jumps on Facebook Live calls at least weekly and preaches the gospel of independent mortgage brokers TO mortgage brokers. I would call him the most influential and hard-working mortgage CEO in the business. His focus on the mortgage brokerage channel has paid off for him. UWM is the top non-bank lender, trailing only the money-center banks (Wells, Chase, BofA, Citi) , UWM funded more loans, through independent mortgage brokers, than the combined volume of retail giants loanDepot, Movement Mortgage, Guaranteed Rate, Cross Country Mortgage, and Guild Mortgage.
Most independent mortgage brokers revere Mat Ishbia; I do. He’s great for the industry, great for the channel, and he wants all of us, and most of all, the consumer, to win against the banking cabal in the country.
Mat’s problem
I started off this article by highlighting that Mat laid down an ultimatum– them or us. I have no love for Rocket Mortgage or Fairway Mortgage– both are snakes slithering in the grass of the mortgage industry. They use mortgage brokers rather than support them so, for that reason alone, I applaud Ishbia’s move. Mat’s problem is that he set an awful precedent. What is to stop him from excluding mortgage brokers from other lender relationships in the future?
Mortgage brokers are independent animals. They pride themselves on being the most knowledgeable and being the only actors, within the industry, with a true fiduciary duty to the customer. They thrive on “shopping” lenders on behalf of customers to get the borrowers the best terms they have available to them. It works, too. Borrowers who use mortgage brokers typically get better terms than if they went directly to a retail lender and lenders typically have a lower cost of acquisition through a mortgage broker than through a their own retail originator. Mortgage brokers pride themselves on offering options and love that THEY are the interface with the borrower.
If Ishbia starts conditioning UWM’s broker relationships, by dictating to brokers which lenders with which they can and can not do business, he is going to alienate those mortgage brokers who really pride themselves on being “independent”. Mortgage brokers have “favorite” lenders, lenders who consistently deliver good pricing and superior execution but I don’t know one mortgage broker who wants to be beholden to any one lender. Mortgage brokers are beholden to customers and consistently offer a loan from lenders who aren’t their “favorite”.
We LOVE 3-4 lenders, UWM is one of them. We really like a dozen more of them. We do business with three dozen lenders and like that each competes for our business.
Ishbia made a bold move today, one I respect and with which I agree but he should tread lightly. Independent mortgage brokers are… well… INDEPENDENT. Mat should remember they work for the customers, not UWM.
