Ever since real estate franchising powerhouse RE/MAX decided to apply the company’s expertise to the provision of home loans, its Motto Mortgage business has been capitalizing on its status as the only national franchisor in the mortgage broker channel.

Launched in October 2016, Motto Mortgage has signed an average of one new franchise owner a week since then. With more than 265 franchises sold in 41 states in a little less than 5 years, Motto Mortgage is now closing in on having a presence in all 50 states.

Once a franchise is sold, Motto Mortgage helps franchisees navigate the licensing process and the multiple steps needed to get their offices open, and currently about 560 loan officers work out of the 164 Motto Mortgage franchises up and running in 38 states. The company is on track to have 200 franchises open by the end of the year.

Having helped 10,000 homebuyers and homeowners find the right lender in 2020 and originating $2.4 billion in loans, the company projects the brokers in its network will do roughly double that volume this year — between $4 billion and $5 billion.

Open Motto Mortgage franchises

Source: RE/MAX Holdings Inc. regulatory filings

Motto Mortgage promotes itself as a turnkey solution — a “mortgage brokerage-in-a-box” — available not only to RE/MAX affiliates, but to any real estate broker or entrepreneur who’s looking for help with technology, compliance, training and marketing.

Ward Morrison | Credit: LinkedIn

“If they had to go out and hire a technologist, a marketing director, a compliance director … it would cost hundreds of thousands of dollars” to get a business up and running, Ward Morrison, president of Motto Franchising LLC, told Inman. “For the price of one employee, they’re getting four.”

From the consumer’s standpoint, Morrison said Motto Mortgage stands out from the lending arms of many other real estate brokerages by providing access to a network of about dozen wholesale lenders who offer competing rates and products.

Morrison estimates about 80 percent of loans originated by Motto Mortgage franchisees are funded by one of five wholesalers: United Wholesale Mortgage (UWM), Caliber Home Loans, Plaza Home Mortgage, Finance of America, and Rocket Mortgage (formerly Quicken Loans).

Motto Mortgage brokers aren’t exempt from UWM’s controversial decision to stop doing business with any broker that sends loan applications to rivals Rocket Mortgage or Fairway Independent Mortgage.

“We tried to provide guidance, but the choice is up to them,” Morrison said of “that unfortunate situation,” requiring mortgage brokers to choose between UWM or Rocket Mortgage.

Another key to Motto Mortgage’s rapid growth is that, as franchise owners grow their business, their monthly franchise fee stays the same, creating the potential for “unlimited profits,” Morrison said.

After paying an initial $30,000 franchise fee (half of which can be financed for 24 months at zero interest), Motto Mortgage charges a monthly fee that gradually increases to a cap of $4,800 month.

“We get a fixed fee that’s the same regardless of loans closed,” Morrison said. As a former mortgage broker himself, he said, “It’s been a treat to see [Motto Mortgage franchisees] increase their loan volume.”

It can be a good opportunity for a real estate broker to augment the commission revenue earned by agents — 71 percent of Motto Mortgage franchise sales to date have been to real estate companies. While most franchisees are RE/MAX brokers (58 percent), another 13 percent are either independent brokerages, or affiliated with another brand. The remaining sales are to entrepreneurs, investors or owners of related businesses like title insurers.

Since most Motto Mortgage franchises are owned by real estate brokers, it makes sense that the Motto network “is heavily purchase-loan focused,” Morrison said. Even during last year’s refi boom, purchase loans accounted for 60 percent of Motto franchisees’ originations, Morrison said, compared to about 35 percent for the mortgage industry as a whole.

If interest rates start to rise, the refinancing boom is expected to tail off, but Motto Mortgage brokers should still have a steady stream of purchase loan customers, if the past is an indicator.

Although individual broker networks like C2 Financial Corp and NEXA Mortgage LLC allow loan officers to set up branch offices, Motto Mortgage is a “true network of independently owned franchises,” Morrison said. An entrepreneur who invests in a Motto Mortgage franchise and successfully grows the business could be rewarded with a “saleable asset” when they’re ready to cash out, he said.

Motto Mortgage has made Entrepreneur magazine’s Franchise 500 for two years in a row, landing 147th overall on this year’s list, up from 395th last year, and capturing a first in the “Miscellaneous Financial Services” category.

Last year’s acquisition of wemlo, a fintech provider of mortgage loan processing services, by parent company RE/MAX Holdings Inc., beefed up Motto Mortgage’s technology proposition.

Since each loan creates its own workload, wemlo users do pay a fee of $695 to $1,195 per loan, depending on the type of loan. That fee can be picked up by the franchisee and built into their expenses and pricing, or paid for up front by the consumer.

Wemlo is currently licensed to serve mortgage brokers and loan originators in 31 states, and Morrison said the company is working to be in as many of the remaining 19 states as possible by year-end.

Although there are plenty of companies that provide mortgage processing services, not all of them are courting smaller originators.

“A lot of providers don’t want to bill mom-and-pops,” Morrison said. “We understand the challenges of the channel, and the power of getting checks from individual brokers.”

Wemlo can also serve as “a great introduction” to Motto Mortgage, Morrison said. “If they’re a mom-and-pop brokerage, maybe they’ll convert to Motto.”

Although the mortgage broker origination channel almost disappeared during the financial crisis and Great Recession of 2007-09, it’s enjoyed a renaissance as consumers and lenders rediscover its benefits.

“We’re bullish on the broker channel, and the choice that it provides to the consumer,” Morrison said. “We feel like the sky is the limit in the broker channel, and Motto Mortgage offers a great way to get into it legally, and compliantly.”

The mortgage business accounts for a small, but growing, percentage of Re/max’s revenue. In its most recent quarterly report to investors, RE/MAX Holdings said its mortgage segment generated $4.73 million in revenue during the first half of the year, up 87 percent from the same period a year ago. The mortgage segment also generated a $1.88 million loss in adjusted earnings before interest, tax, depreciation and amortization (EBITDA), up from $1.32 million in the first half of 2020.

The company also reported paying close to $13 million to acquire Wemlo Inc. RE/MAX paid $6.1 million cash, plus $3.3 million in Class A common stock, and another $6.7 million in equity-based compensation “related to two employees who departed.”

Email Matt Carter

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