An explosive investigation and class action suit that allege United Wholesale Mortgage
The report
While some industry stakeholders think the case could lead to
"It was already bad enough with all of the infighting on the lending side, and when you layer on top these claims, it just doubles down on the reputational hit. It's not a good look," said
Consumer confidence was already wobbly during the Great Recession and "brokers and banks took it on the chin pretty hard once regulators came out," said
The same situation may unfold this time, but solely with the TPO channel, he predicts.
"There was a view at the time that a retail-originated loan was of better quality than a TPO originated loan and I think these sentiments may come back," said Dallas. "This is not good for the broker channel in that way. It's an easy jump for regulators to take a closer look at it and clearly an easier jump for securitizers to say 'I don't want to deal with potential risk.'"
Broker Andrew Dort, owner of Pride Lending, agrees. "Anytime you have such a high profile story, there's going to be scrutiny from regulators and that is not always a bad thing, but it also shakes the confidence of the consumer in our channel," he said.
"Well educated loan officers on the broker side are superior in terms of what they can offer to a client than on the other channel, but shaky faith in that could ultimately lead to consumers actually paying higher prices by sticking with say more traditional correspondent lenders," Dort added.
Paul Hindman, industry veteran, sees this as "just the beginning, and if proven, will reignite a chain reaction that will be felt by the entire industry and will once again give consumers more reasons to distrust home financing companies and the people that work for them."
Meanwhile, Scott Olson, executive director at Community Home Lenders of America, said the allegations are "not reflective of the overwhelming majority of IMBs" and if true, the allegations facing UWM are "troubling."
As the court of public opinion and the Michigan federal court hashes out whether UWM is guilty of "systematically and intentionally corrupt[ing] the wholesale mortgage channel," some say this will be a wake-up call for the broker community.
"I think the culpability really comes down on the brokers themselves, which is why I think this is going to be a reckoning for our industry," said Dort. "I don't necessarily think that fostering a culture of sending loans to a particular company is a bad thing. That's their job. But any broker who exclusively sends loans to one lender, if you're not checking the rate sheets on all of your available lenders, how do you know that you're in fact doing what's best for the consumer?"
Broker Andrew Harris, president of Vantage Mortgage Brokers, echoed similar sentiments, noting it took too long for the industry to start paying attention to the fact that some brokers only do business with one wholesale lender.
"The outcome of this needs to be where brokers understand that they have a fiduciary duty to the consumer, and they need to respect that and not lie to the public," Harris said. "If you're out there saying you shop hundreds of lenders and you're lying, you're literally a fraud. That's not okay."
The suit may result in "some clarity on what the real definition of a broker is and what everyone should and should not be doing," added Michael Kelleher, mortgage consultant.
"I think also the real story here is it's a reminder that brokers need to add another piece of paper to their file and every closing explaining why they chose a higher rate because there's a lot of benefits to working with different companies, it's not just rate," he added.
