Defender of the Realm?

Defender of the Realm?

UWM’s Mat Ishbia claims authority to set terms for the brokerage community. But many say the unprecedented move could rob brokers of their unique advantage.

BY LEW SICHELMAN | NATIONAL MORTGAGE PROFESSIONAL CONTRIBUTING WRITER

Mortgage brokers are a fiercely independent bunch. That’s why they are mortgage brokers; they don’t like anybody telling them what to do.

That’s why the proverbial s**t hit the fan in early March when Mat Ishbia, president and CEO at United Wholesale Mortgage, gave his customers an ultimatum – them or us.

Or, as he said in a Facebook post, UWM won’t do business with you if you work with either Rocket Mortgage or Fairway Independent Mortgage.

The reaction, as you might expect, was swift. “We’re not even sure this is legal. It certainly isn’t ethical. And it doesn’t represent the American way of free enterprise,” National Association of Mortgage Bankers President Kimber White said in a statement.

White, a partner in RE Financial Services in Oakland Park, Fla., ruminated further, saying UWM’s edict “runs counter to the spirit and independence” that is the backbone of the brokerage business. “You should be allowed to work with whomever you want and who offers the best product and customer service,“ he posted. “Not a company that dictates your business model to you. At NAMB, we support all lenders and your choice for whomever best supports you, your business, and your borrowers. We’re NAMB for all.”

The association leader asked his members what they thought: “If a lender dictated to you what others lenders you could work with, you would...? “

Not surprisingly, 70 percent of the 854 members who responded quickly said they didn’t like the idea, not at all – 354 said they would disregard such a pronouncement and 245 would report the company to state and local authorities for being anti-competitive.

What is surprising, perhaps, is that 255 brokers – nearly one out of every three – said they would comply.

I’ll get to what the protagonists in this little drama have to say in a moment. First, though, let’s take a look at some of the thinking out there in the hinterlands.

UNEASY FEELINGS

Posting on the NAMB’s website, David Krichmar in Houston, Tex., seemed to accept the inevitable. No, he didn’t like UWM’s line in the sand. “Us brokers have no choice and Ishbia knows that,” the VA loan specialist wrote. “We need one-day turn times more than we need Quicken,” Rocket Mortgage’s former name.

Still, the Texas broker was not pleased about having to make a choice. “This is market manipulation,” he said. “Something needs to be done to stop this. It’s a strong-arm tactic and leaves us brokers no choice. We need UWM more than Quicken, even though both are good for our industry. This requires a legal and regulatory response.”

On the other side, Michael Rankin of ClearPath Mortgage Solutions in Latham, N.Y., agreed with NAMB’s White’s thinking at first. But “after further deliberation,” he posted, he doesn’t believe the UWM throwdown is a threat to free enterprise.

As Rankin sees it, Ishbia has taken a stand against unethical, deceitful practices – “ones I frankly was unaware of...Brokers are mad because Quicken has some great technology and pricing but I’m willing to sacrifice that for the greater good of preserving the broker channel. “

“I’m genuinely proud of what Mat and UWM have done,” agreed Shah Tehrany of Madison Mortgage Services in Lake Success, N.Y. “It stops here. No further. It’s time for Quicken and Fairway to exit a channel they don’t belong in,” he posted on UWM’s facebook page.

Richard Miller of Bridgeway Financial in California’s Bay Area is one broker who seems angry, as Rankin suggested. But with Ishbia, not Rocket or Fairway. He said he would call UWM, “state my case and not use them.”

But Chris Burleson of Knoxville (Tenn.) Mortgage Brokers took a “so what” position: “Who cares,” he posted. “Get back to work.”

CEO’S CONTENTION

Ishbia cares, that’s who. Or at least he says that’s the reason for his ultimatum. “We are all in for brokers,” the long-time champion of the wholesale channel has said repeatedly.

And he’s fed up with the poaching he says Rocket and Fairway are doing to the detriment of the business. “These two lenders are attacking the lifeblood on the wholesale community by soliciting loan officers away from brokers and working directly with real estate agents to cut brokers out of the entire process,” he asserted, without, however, showing proof.

The United Wholesale president said he is simply trying to unite the brokers with which his company works “to protect their own long-term business.” And in so doing, he required the 12,000 brokers in the UWM network to sign an acknowledgment that they will not send any loans to the two competitors once they have closed out their pipelines with them. A violation of this pledge is subject to damages ranging from $5,000 to $50,000. By his deadline, UWM reported that approximately 10,000 brokers had signed.

As you might expect, the UWM rivals didn’t back off from Ishbia’s challenge. In a statement just a few days before Ishbia’s deadline, Fairway CEO Steve Jacobson reminded brokers that he was one of them before the Madison, Wisc.-based company grew into a mortgage banking entity. “We will always support a broker’s decision to work with any lender they(sic) choose and we will continue to work everyday to earn the trust and respect of our origination partners,” Jacobson said.

“We are grateful for the mortgage broker community...We can only concentrate on putting our best foot forward to do the right thing for our clients and all our business partners, and we will continue to work to achieve that goal each and every day.”

FREEDOM RESCINDED

Austin Niemiec, executive vice president of Rocket Pro TPO, took a more adversarial stance, however, saying Ishbia’s decision “decimates the idea of the free and open market that is so critical to the broker community. We continue to advocate for the right of brokers and consumers to choose how they secure home financing. We do not support restricting consumers’ options – whether it is through economic and social pressure or intimidation tactics.”

And in a note to brokers. Niemiec was even more pointed. Claiming his own company’s growth “clearly has UWM very concerned,” he said Rocket “will never take away choice because it’s what moves our business forward...A broker’s power is in their ability to choose the best option for their client. By attempting to manipulate the market..you harm their ability to compete. This move only benefits one company, to the detriment of thousands in their broker community and their clients.”

TRUE IMPACT?

At the end of the day, however, there is a large question about how effective the UWM initiative has been so far. Once Ishbia’s March 15 deadline to sign its new agreement had passed, Niemec stated that “the real facts are that we are aware of many brokers who didn’t even receive an addendum…. To believe that 10,000 broker-owners bent the knee to UWM is laughable.”

Niemiec also argued that 22 of his company’s 25 largest partners rejected UWM’s ultimatum and will be continuing to work with Rocket. He stated that of those companies, many of them did more business with UWM prior to being forced to choose.

“In addition, one of UWM’s largest partners – who, previous to the ultimatum, had barely worked with us – has committed to doing business with Rocket Pro TPO and is refusing to sign UWM’s contract. Also, thousands and thousands of brokers told us they would not agree to UWM’s terms,” said Niemiec.

He added that the broker community has responded with a vote of support for Rocket, with daily registrations up 40% since Ishbia’s ultimatum. Recently, Fairway Independent Mortgage Corporation also issued a statement that shares similar sentiments to Niemiec’s response. Fairway CEO Steve Jacobson stated that UWM’s recent announcement gave the company added attention and extra opportunities.

Rocket Companies CEO Jay Farner also echoed the sentiment stating that “more than 8,000 independent brokers have rejected becoming a controlled UWM branch.”

MBA JUMPS IN

Even the Mortgage Bankers Association weighed in on the kerfuffle. President Bob Broeksmit said his group “does not condone activities designed to thwart competition in the mortgage market and limit loan options available to borrowers...Borrowers are best served when they have choices created by a robust, competitive market that offers a multitude of loan prices products and service levels.”

According to Ishbia’s count, the them-or-us flap is not as big a deal as it seems. Only 3,000 or so of UWM’s brokers also do business with Rocket and Fairway. And in the 24 hours after he threw down the gauntlet, he reported, 93 percent of those who had quickly made up their minds had chosen to sign United Wholesale’s contract addendum.

“We are not saying you have to use UWM exclusively or even use UWM at all,” the company president wrote on Facebook. “The choice is 100 percent yours to make. There are plenty of options available. You can choose to partner with UWM and 73 other wholesale lenders. Or you can choose Fairway/Rocket and 73 other wholesale lenders. Either way, there is an abundance of choice.”

But Rocket’s Niemiec has some figures of his own. His company’s “incredible growth” – a 125 percent increase in business last year, he claimed – has UWM “very concerned,” he wrote in his brokers’ note. According to one news report, moreover, a Rocket spokesman called Ishbia’s numbers “intentionally misleading.” In the week since the UWM president’s ultimatum, he said, broker loan registrations at Rocket were up 40 percent, and the company was on pace to add 600 new brokers to its platform in March alone. If that holds, he added, it would be the best month in terms of broker growth in the company’s history.

Meanwhile, some attorneys have questioned the legality of Ishbia’s action. But Ishbia said he consulted his lawyers – both internal and external – before proceeding and they had no concerns. He also said there is no coercion in the dictum. Brokers have a choice, one that’s 100 percent up to them. “We are not saying they have to use UWM exclusively or even use UWM at all.”

As the fracas played out, Ishbia said he has no intention of adding any other wholesalers to his Do Not Patronize list. But more than a few brokers have suggested he should, indeed, do just that, in some cases naming names. So stay tuned.