United Wholesale Mortgage is no longer buying loans from mortgage brokers working with Fairway Independent Mortgage and Rocket Cos.
It was proposed as "us or them" by Mat Ishbia, President and CEO of UWM, during a Facebook Live presentation on Thursday. "If you work with them, you will no longer be able to work with UWM immediately.
"I'm not going to help you help the people who violate the brokerage channel," Ishbia continued.
However, UWM is recognized as the largest wholesale lender in the business, and this announcement could be viewed as anti-competitive by some.
According to the Federal Trade Commission website, group boycotts could be an illegal act.
"Any company can refuse to do business with another company on its own, but an agreement between competitors not to do business with any target or company can be an illegal boycott, especially when the group of collaborating competitors has market power." the website said.
The website provides several examples of illegal boycotts, including cases where such action restricts competition and has no business justification.
"The real problem with this is that it invites examination at the federal, state, class action and competition levels," said Marx Sterbcow, a compliance attorney for the mortgage industry.
Both UWM and its brokerage network must consult lawyers who specialize in antitrust matters, he added.
"Don't limit competition at all. There are over 70 other large wholesale lenders that brokers can work with every day," Ishbia responded to a follow-up question during the Facebook Live session. "There are only two companies chasing the lifeblood of the broker community – brokers and loan officers – and it is our responsibility to protect the future of the wholesale channel as we help all of our broker partners grow."
However, there could be other reasons for moving UWM. Since the company returned to the market after an initial pull-out at the beginning of the pandemic, its interest rates have been higher than those of the competition, said George Duarte, owner of Horizon Financial Associates, a Fremont, Calif. Mortgage broker, has worked with both UWM and Rocket done business.
"My customers, whether they buy or refinance, are interest rate sensitive. I don't sell prices as my primary feeling, but you still have to have competitive prices," said Duarte.
While UWM has the right to choose its niche in the market, it is a mortgage broker's best job for its clients and business model, Duarte said. That includes having a variety of lenders available to cater to the diverse needs of customers, Duarte said. People go to Horizon because it works with a lot of lenders.
"As an independent contractor, I refuse to be told that I have to decide where to send my business," said Duarte. "I'm independent; nobody tells me where to send my business."
Fairway was actively recruiting loan officers from mortgage brokerage businesses, Ishbia said on the video, adding that Rocket was cited for a program that works directly with real estate agents and takes the mortgage broker off.
Fairway declined to comment.
Austin Niemiec, executive vice president at Rocket Pro TPO, responded in a statement that derisively referred to UWM as "Shore Mortgage." Previously, UWM was called United Shore Mortgage. Niemiec said the move was due to his company's 125% increase in business in 2020.
"If you try to manipulate the market and have loan officers swear allegiance and sacrifice control as a business owner to a company – with financial penalties if they get lost – you are damaging their competitiveness," said Niemiec. "This move will only benefit one company, to the detriment of thousands in the brokerage community and their customers."
By March 15, mortgage broker shopkeepers are required to sign an addendum to their agreement with UWM promising not to sell to Fairway or Rocket.
A statement is included on this certificate stating that if the agent or its employees fail to comply with the agreement, they will be liable for "liquidated damages" of US $ 5,000 per loan with UWM or US $ 50,000, whichever Amount is higher.
"Here's the question – are you all in?" Ishbia asked mortgage brokers during the video presentation. "There are 75 great lenders out there. You must have options, but there are two out there that are violating the Channel."