More real estate brokerages are starting to offer mortgages, as traditional partnerships with lenders have been eroded by compliance strains and new incentives to control more of the homebuying transaction.
Realty firms' forays into mortgage finance have taken many shapes. The real estate franchisor
Earlier this year, those brands were phased out and the business was renamed Keller Mortgage to leverage a deeper connection with the Austin, Texas-based real estate franchisor.
In addition, the online real estate brokerage Redfin
These affiliated mortgage businesses, whether through joint ventures or outright ownership of a mortgage company, are often replacing the marketing services agreements with lenders that have come under fire over the past few years.
There are several benefits to having a formal tie between a real estate company and a mortgage lender. "First and foremost, as you get scale, it is a natural extension and it's an adjacent growth opportunity in the mortgage business," said John Campbell, an analyst who follows publicly traded real estate companies for the investment bank Stephens Inc.
There is also a competitive advantage to owning a mortgage company outright or through a joint venture, such as being able to turn around transactions faster by creating a seamless process between the two entities, he said.
Keller Williams executives declined multiple interview requests. In an email, company spokesman Darryl Frost said getting loans closed on time is a key goal of the Keller Mortgage strategy. It is offering preapprovals through the Keller Williams mobile app, access to loan officers seven days a week and no payments until closing.
And to entice homebuyers to use the lender, Keller Mortgage won't charge Keller Williams customers lender fees and offers a $1,000 credit at closing. The deal applies to consumers Keller Williams serves as the buyer's agent, as well as those making an offer on a property listed by a Keller seller's agent.
In addition to controlling more of the process, real estate companies see mortgage lending as a way to add to their revenue streams.
"As in so many other businesses, margins [for real estate brokers] have been under pressure for 20-plus years, and since this related to the process of someone buying a home, why not offer the mortgage and title, property and casualty and escrow services?" said Steve Murray, the president of Real Trends, a real estate industry research and consulting firm.
MSAs came about as an alternative as the Department of Housing and Urban Development stepped up enforcement of what it considered to be sham joint ventures, Murray said.
In 2011, Prospect Mortgage
Wells Fargo Home Loans
MSAs starting falling out of favor after
But such crossover activity has been going on for decades with mixed results, said Murray. Large homebuilders like Lennar and Pulte own mortgage companies. Others have joint ventures with lenders, like the partnership between KB Home and Stearns Lending.
Likewise, Nationstar Mortgage Holdings tried to create its own catch-all operation in Xome, which in 2015 had been marketed as
Still, not every real estate company is rushing out and starting its own mortgage business. Realogy and PHH, which at one time had common ownership, are
To own a mortgage banker outright or in a joint venture takes plenty of capital, Murray pointed out.
The privately held Keller Williams has 752 market centers in the U.S. and Canada, which did $58.4 billion in sales volume in the first quarter.
By comparison, Realogy has 6,000 franchised offices in the U.S., plus its NRT subsidiary owns 780 offices. In the first quarter, NRT and the franchised offices combined did $96 billion in home sales.
Remax had 3,679 offices in the U.S. at the end of the first quarter. The company would not disclose sales volume, but in its first-quarter earnings presentation, it said it did over 1 million transactions during 2016. Motto is a mortgage brokerage, and that requires less capital for the Remax operators that purchase a franchise.
Keller Mortgage is a call center operation, similar to how Smarter operated. It will not have loan officers embedded in its franchisee's offices.
The mortgage company is licensed to do business in 26 states and will first concentrate on doing loans in Texas.
"Texas is the birthplace of Keller Williams and it commonly serves a test market where new initiatives are rolled out," Frost said.