Op-ed views and opinions expressed are solely those of the author.
When mortgage rates dropped below 3 percent in July for the first time in nearly 50 years, the U.S. experienced a spike in mortgage lending – the largest since the 2008 financial crisis – driven largely by refinancing.
Now, as mortgage rates start to tick up the leading wholesale lender in the country has threatened mortgage brokers in a way that could make it even more difficult for homebuyers and individuals looking to refinance to get the best possible rate.
Earlier this week in a Facebook Live broadcast, United Wholesale Mortgage (UWM) CEO Mat Ishbia gave brokers an unprecedented ultimatum: you either work with UWM, or you work with Quicken Loans/Rocket Mortgage. The two powerhouses represented a combined 880,000 home purchase and refinance loans in 2019, ranking them as the two largest mortgage lenders in the country.
Ishbia estimated that 25 percent of the more than 50,000 brokers in the U.S. work with both companies, so his demand is forcing some 12,000 brokers to make an unusual business decision by March 15: UWM or Rocket. Those sticking with UWM will have to sign an addendum committing to not do business with Rocket or Wisconsin-based Fairway Independent Mortgage Corp., both of which are sizeable UWM competitors.
UWM’s new policy comes after Quicken Loans in January announced a new national mortgage broker directory as part of the company’s effort to expand options for home buyers and help brokers to grow their own business. The company, which originated $320 billion in mortgages last year, says it is investing $100 million into the broker channel in 2021.
Ishbia believes brokered mortgages will rise to a third of the overall market, and UWM will have a near 50% share. While he claims to be acting in the interest of the wholesale mortgage channel, the facts suggest he may be more concerned about Rocket closing in on his market share rather than protecting the wholesale channel. His anti-competitive policy is a clear attempt to silo brokers into working with UWM.
His call to solidarity isn’t victimless. While he is attempting to assemble an empire of brokers to build his wealth, Ishbia is actively undermining the entire mission of mortgage brokers: to find the best interest rates for home buyers or those looking to refinance. But eliminating competition will leave consumers with higher costs and brokers with fewer options. Tying brokers’ hands in this way only benefits UWM – the lender.
Experts have echoed concerns.
“We’re not sure this is even legal. It certainly isn’t ethical,” National Association of Mortgage Brokers President Kimber White said. “And it doesn’t represent the American way of free enterprise.”
Erik Gordon, a professor at the University of Michigan’s Ross Business School, said the move makes UWM look weak, which likely means it is losing business. “This isn’t some high moral stance. If you say something like ‘you have to decide it’s us vs. them,’ you’re worried about people shifting a little bit of their business. Rocket must be doing something that appeals to some of the independent brokers, or United Wholesale wouldn’t have to make that threat.”
While Ishbia’s ban might give UWM a brief competitive edge in the short-term, forcing brokers to choose between three industry leaders, consumers will end up with fewer options and brokers will have to determine what’s in the best interest of their customers.
Michael Busler, Ph.D., is a public policy analyst, economics expert and a professor of finance at Stockton University