Mortgage Brokers – Still Truly Independent? By Mike Fawaz

?Mat Ishbia, on UWM’s August 9, 2022 earnings call said:

“Lastly, everyone considers [this] a tough mortgage market. However, I continue to say, UWM is able to deliver strong earnings, capture more market share in this type of environment.

With that said, we are now deciding to take advantage of our pricing power by making investment into our future growth. The investment we make today will have exponential benefits in 2023, 2024 and 2025 and beyond.

And we continue to capture more market share, and not only position ourselves to win but dominate the future. And we feel great about the decision we made. As I said before, we control the margins, we decided to lower margins strategically to grow the broker channel and help us continue to grow our market share.”

Ishbia was clear to Wall Street.?He believes UWM has “pricing power” over brokers.?He brags, “we control the margins…”

If he’s right, that presents an very clear danger to America’s mortgage brokers and their clients.?One of the most powerful benefits of being a mortgage broker is independence.?Independence of choice and real competition is the only effective tool a broker has to ensure someone else doesn’t dictate margin and terms to them.

If America’s brokers needed an example of what happens when they lose control of their margins, Ishbia recently gave them one.

Ishbia launched a program he calls, “Loan Shield.”?But the only thing that is getting the “shield” is Ishbia’s profits.?

After years of bragging that UWM either doesn’t sell servicing or, if they do, they sell it with a non-solicit – “Loan Shield” slams the door closed on that promise.?Now, if a broker doesn’t want UWM to sell their servicing to buyers, without any protection, their clients must pay 30 basis points.?Given today’s average loan sizes, that’s roughly $1,000 a loan!

Does Ishbia have the right to increase and decrease margins or charge for non-solicit protection??Of course he does – as does any other lender.

But Ishbia decided to change the game a year and a half ago.?Likely as a result of losing market share, rather than fighting to increase share by providing more value to America’s mortgage brokers, Ishbia chose to coerce small brokers via brute force.?He had his lawyers draft a contract that said, if a broker uses UWM and also uses Rocket or Fairway to broker loans, that broker would be in breach of the UWM contract and would owe UWM $50,000 or more.

This “Ultimatum” dramatically reduced broker freedom and broker choice.?During the boom years of the pandemic – few noticed or cared.?Loans were plentiful.?But as the market returns to reality, the impact of Ishbia’s strong arm tactics are becoming painfully clear.

At least 5 of the top 10 wholesale lenders have exited the space.?UWM and Rocket combined have 50% plus market share of the wholesale market.?Ishbia’s claim that “he controls the margins,” of “his” brokers is becoming more and more true.?

Rocket doesn’t charge for a “Loan Shield.”?Rocket provides 1 year of non-solicit for free.?Shouldn’t brokers be able to choose from ANY lender for their clients??If UWM wants to charge $1,000 for an average loan to get a non-solicit – brokers should be able to choose Rocket.?If Rocket increased margins or fees, the broker should be able to choose UWM.

The market right now is difficult for all lenders.?Increasing revenue and profits is on the mind of everyone.?But if a very powerful lender chooses to increase margins or fees – what protections does a broker have??If they have choice, they can keep those lenders honest.?If they don’t have choice – they essentially become a net branch of that big lender.

Rocket Pro TPO fundamentally believes in broker choice and broker freedom.?We don’t tell brokers which lenders they can, and can’t, use to find the best deals for their clients.?We don’t see ourselves as the self-appointed police for the industry.?We earn market share by offering a great price, product, technology and service.?If a broker believes they can do better with another lender then they will, and should, take their business elsewhere.

“Freedom is something that dies unless it is used.”

– Hunter S. Thompson