United Wholesale Mortgage ultimatum hurts brokers and consumers alike

It has been over two months since Mat Ishbia’s Facebook Live tirade, and the mortgage industry is still struggling to make sense of United Wholesale Mortgage’s unparalleled ultimatum to brokers.

Why would the leading wholesale mortgage lender cut off independent brokers’ access to two of the other largest mortgage lenders — Rocket Pro TPO and Fairway Independent — and inhibit brokers from best serving their clients: homebuyers and homeowners looking to refinance?

Ishbia has claimed it has all been in the interest of independent brokers, but experts across the board have called it “bizarre,” “unethical” and “anti-competitive,” and suspect the move to be more of a knee-jerk reaction to Fairway and Rocket’s continued growth in the wholesale mortgage market than anything else. The National Association of Mortgage Brokers and others even questioned its legality.

Now, despite missing their goal of getting 80% of independent mortgage brokers locked in, Ishbia has declared victory. But what may be a victory for UWM in his eyes is certainly a loss for consumers, brokers and the free market in the long term.

Mortgage brokers play a key role in helping consumers navigate the financing process, leveraging competition between big banks and other mortgage servicers to find the best borrowing terms and rates available. But they are only able to meet the needs of homebuyers and those looking to refinance when they have access to the full scope of lenders. This is especially important for low-income or credit-challenged borrowers, who might struggle to find affordable financing from some lenders.

As David Stevens, the former CEO of the Mortgage Bankers Association and former FHA commissioner, explained: “A broker is not beholden to any specific lender and thus can provide a far broader set of options to the consumer. Forcing a broker to not do business with a specific wholesale lender due to their competitive practices would lead me to question whether that broker truly provides the best broad set of choices to provide the most optimal options.”

By banning brokers from working with Rocket and Fairway, borrowers will have fewer options, a less than comprehensive experience and higher costs overall.

That is why Consumers for a Strong Economy (CASE) recently launched Save Broker Choice, a new project to support consumers and protect competition in the mortgage industry. The marketplace should drive better rates and improve the overall consumer experience, but UWM’s policy does the opposite by restricting competition and limiting options for brokers and consumers alike.

One broker took to YouTube to explain his company’s position and broader concerns:

“We believe in free choice, and bringing the best loan to our clients,”said Roger Mansourian, a broker at Vantage Realty & Home Loans, whose firm did not sign UWM’s addendum. “We are choosing Rocket, we are choosing freedom. We don’t want to set a standard of banks telling us what we can do, what we can’t do, where we can send clients, where we can’t send clients, and then threatening to be fined $50,000.”

American homeowners and homebuyers — like all consumers — deserve a competitive marketplace. They deserve choice, as well as access to diverse and affordable options best for their individual needs. UWM’s new anti-competitive policy is putting that at risk, and consumers will ultimately have to pay the price.

UWM’s ultimatum sets a dangerous precedent for the mortgage industry and beyond. We could see similar decrees popping up in other industries, from manufacturing to service-based sectors and everywhere in between. Plain and simple, this is bad policy and should not be allowed to stand.