UWM-backed study compares wholesale and retail origination savings

United Wholesale Mortgage has shared a study of public data backing its "brokers are better" mantra, sharing some math describing consumer savings with wholesale as compared to retail lenders.

According to one calculation, borrowers who worked with third party originators last year will save on average $10,662 over the life of their mortgage loan versus those who worked with retail lenders. An executive summary of the report shared other findings, including how brokers are catching up to the retail lender market share in minority census tract lending. 

Polygon Research conducted the study with support from UWM and Willow Canyon Advisors, a firm founded by former Home Point Capital president and CEO Willie Newman. The research drew on Home Mortgage Disclosure Act data, federal housing agencies' single-family performance data and mortgage-backed securities data sets. 

Lee Jelenic, chief innovation officer at UWM, said that the savings on differing compensation structures between brokers and retail loan officers was due to less advertising spend for wholesale, and healthy competition in the TPO space. He added that the company was proud of third-party analysis rooted in publicly available data. 

"You've got two very low-cost businesses delivering a mortgage to a consumer," said Jelenic of mortgage brokers. 

The study used two separate calculations to look at origination costs. The $10,662 figure was determined using estimated annual percentage rates in 2023 for 30-year fixed rate home purchase agency loans for the independent TPO channel (7.00%) and independent retail channel (7.11%).

The second calculation analyzed HMDA metrics including fees, interest rate, lender credits and the loan amount. That analysis found homebuyers last year paying brokers 115 basis points upfront to secure a 6.58% interest rate, compared to 148 bps upfront and a 6.60% interest rate with nonbank retailers.

Those figures translated to average savings of $3,500 per loan, according to Polygon. Under that analysis, wholesale outsaved retail for four of the past five years, excluding 2020. Broker savings over the life of the mortgage were as high as $12,000 per loan in 2021. 

In addition, the strictly HMDA data analysis found Department of Veterans Affairs borrowers saving $13,432 over the life of their loan with third-party originators. Wholesale VA borrowers secured on average a 6.26% interest rate and paid 87 bps, compared to retail VA borrowers who secured a 6.40% rate and paid 106 bps. 

The research only focused on the non-depository lender segment, which has accounted for almost two-thirds of the mortgage market in recent years. The report's authors also noted they couldn't account for total loan costs which included factors such as title insurance. The analysis included further technicalities, and details that were not shared publicly. 

The National Association of Mortgage Brokers said this week it was reviewing the Polygon study to understand its findings, and that it may share some insights. 

"NAMB remains steadfast in its support of the mortgage broker channel, which offers substantial cost savings to homebuyers and also critical benefits such as local market expertise, personalized loan solutions, and professional guidance," said Valerie Saunders, president of NAMB, in a statement. 

The study also found the TPO market share increasing in majority-minority census tracts, rising to 42.3% of agency home purchase originations in 90% to 100% MMCTs, compared to a 27.2% share in census tracts with a less than 50% minority share. The TPO channel also had higher approval rates last year for all loans in MMCTs versus retail, 70% to 58%, Polygon found. 

"Brokers are in a better position because they are so embedded in their communities, they are small businesses in touch with their local community," said Jelenic. "And they can just offer a better service in order to get the best loan for that consumer." 

UWM President and CEO Mat Ishbia said in a press release this week the company believes brokers could eventually comprise 50% of the mortgage market share. UWM, and former Home Point boss Newman, were at the front of the wholesale market during the recent origination wave, which was characterized by pricing wars in that portion of the market.