About 65% of 4,600 independent mortgage brokers agreed not to do business with Rocket Companies Inc. and another competitor, missing United Wholesale Mortgage Holdings Corp. CEO Mat Ishbia's expectations to enlist 80% or more.
The Pontiac-based lender issued an ultimatum earlier this month saying it no longer will work with brokers originating loans through Detroit-based Rocket and Wisconsin's Fairway Independent Mortgage Corp. It accused the companies of "unethical" business practices.
The 4,600 brokers who worked with UWM and Rocket or Fairway had until Monday night to agree to an addendum to keep working with UWM. About 3,000 accepted; UWM declined to provide a list of names. Roughly 400 brokers declined the addendum, and another 1,200 have not responded. UWM will close out pending loans with them, but won't originate new loans, a company spokesperson said.
"Not responding doesn’t mean they didn’t commit — we’re still in communication with those who haven’t accepted or some clients are out of town, and it would be a vastly poor assumption to think that all those who have yet to accept won’t accept," the spokesperson said in a statement.
"We expect about 50% of the undecided will accept, but regardless, out of the 12,000 clients we have, about 85%+ will be all in with UWM."
In total, UWM now has about 10,400 brokers, down from 12,000 when the ultimatum was issued. UWM needs broker partners, because it is the only way the company originates mortgages. It is the largest lender in this wholesale channel, which represents more than 20% of annual U.S. mortgage volume. Rocket and Fairway, on the other hand, also have direct-to-consumer retail divisions.
Rocket says the ultimatum is anti-competitive and takes away choice, which is the purpose of the broker channel, and that "thousands and thousands of brokers" told Rocket they would not agree to UWM's terms.
Austin Niemiec, executive vice president of Rocket's wholesale Rocket Pro TPO business, had encouraged brokers not to respond to the addendum, which requires brokers to pay $50,000 or more if they sign and then begin originating a loan with Rocket or Fairway.
Experts say the ultimatum is unlikely to affect consumers looking to get the best rates given the competition in the industry.
"I think it doesn't mean a lot," said Matthew Roling, an adjunct professor of finance at Wayne State University who previously worked for Rocket Mortgage-affiliate Rocket Ventures from 2012 to 2017. "The service and the pricing and the convenience consumers get won't be seriously impacted by this."