Guaranteed Rate's exit from the wholesale channel is an outlier that few companies are likely to follow.
The mortgage brokers who worked with Stearns Wholesale "saw the writing on the wall" after Guaranteed Rate's purchase of Stearns Lending a year ago, said Brendan McKay, president of the broker association of the Association of Independent Mortgage Experts.
"Guaranteed Rate is a retail-focused company and the expectation was that they wouldn't close the deal to go wholesale," McKay said. "I don't expect more lenders to exit wholesale; if anything, I expect more lenders to enter the wholesale channel as brokers' share of the market continues to grow."
As interest rates rise, broking is attracting interest from home mortgage originators who are no longer burdened by a large refinancing pipeline of outstanding loans, locking them to their employer.
As a result, the lenders that are likely to exit wholesale now are the likes of Guaranteed Rate, which don't have a major presence in the channel, McKay continued.
Chicago-based Guaranteed Rate confirmed the news, but no further details were given.
In 2005, Guaranteed Rate worked with approximately 100 mortgage brokers but eventually, like many other lenders, exited the wholesale channel.
Stearns was once one of the largest wholesalers in the mortgage business. However, in recent years, Stearns management has placed an emphasis on developing other lines of origin, such as the retail channel and joint ventures with both smaller companies in and outside of the mortgage industry.
That brought Guaranteed Rate to Stearns, whose former owner Blackstone bought the latter company out of bankruptcy in October 2019. The joint venture business was considered one of the reasons for the transaction. In 2017, Guaranteed Rate itself had a joint venture with Realogy Holdings Corp. formed to create Guaranteed Rate Affinity, which markets its services to Realogy's real estate brokerage and relocation subsidiaries.
Brokers doing guaranteed rate business should have no trouble finding another outlet for their production, AIME's McKay said.
But he cautioned them to keep a close eye on customers who had taken out guaranteed-rate loans and fully expected the lender to call in those borrowers by the time they needed their next mortgage.