United Wholesale Mortgage will no longer purchase loans from mortgage brokers that work with Fairway Independent Mortgage and Rocket Cos.
It was put as an “us or them” proposition by Mat Ishbia, UWM's president and CEO, during a Facebook Live presentation on Thursday. "If you work with them, you can't work with UWM anymore, effective immediately.
"I'm not going to help you help the people that are
However, UWM is acknowledged to be the largest wholesale lender in the business and this announcement could be considered by some to be anticompetitive.
According to the
"Any company may, on its own, refuse to do business with another firm, but an agreement among competitors not to do business with targeted individuals or businesses may be an illegal boycott, especially if the group of competitors working together has market power," the website said.
The site provides several examples of illegal boycotts, including instances in which such actions restrict competition and lack a business justification.
"The real problem with this is that it will invite scrutiny from a federal level, a state level, a class action level and from a competitive level," said Marx Sterbcow, a mortgage industry compliance attorney.
Both UWM and its broker network need to consult with attorneys that specialize in
"Not restricting competition at all. There are over 70 other great wholesale lenders to work with, that brokers can work with each day," Ishbia said in response to a follow up question during the Facebook Live session. "There are only two companies who are going after the lifeblood of the broker community — Realtors 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."
But there could be other reasons behind UWM’s move. Ever since the company returned to the market after an initial pull out at the start of the pandemic, its rates have been higher than the competition, said
"My clientele, be they purchase or refinance, they're rate sensitive. I don't sell rates as my primary sense of being, but nevertheless one has to have competitive rates," Duarte said.
While UWM has the right to choose its niche in the marketplace, it is a mortgage broker’s job to the best for his clients and for his business model, Duarte said. And that includes having a variety of lenders to work with in order to address various needs of clients, Duarte said. People go to Horizon because it works with many lenders.
"I as an independent business person resent being told that I have to choose where to send my business," Duarte said. "I'm independent; nobody tells me where to send my business."
Fairway was actively recruiting loan officers from mortgage broker shops, Ishbia said in the video, adding that Rocket was cited for a program that works directly with real estate brokers, cutting out the mortgage broker.
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 driven by his company’s 125% increase in business in 2020.
"By attempting to manipulate the market and have loan officers swear allegiance, sacrificing control as business owners to one company — with financial penalties if they stray — you harm their ability to compete," Niemiec said. "This move only benefits one company, to the detriment of thousands in the broker community and their clients."
By March 15, mortgage broker shop owners will have to sign an addendum to their agreement with UWM, promising not to sell to either Fairway or Rocket.
Included in that attestation is a statement that reads if the broker or its employees breach the agreement, they are liable for "liquidated damages" of $5,000 per loan closed with UWM or $50,000, whichever is greater.
"Here's the question — are you all in?" Ishbia asked mortgage brokers during the video presentation. "There's 75 great lenders out there. You need to have options, but there's two out there that are hurting the channel."
