United Wholesale Mortgage, the nation’s biggest wholesale mortgage lender, is slashing rates and urging retail loan officers to defect to independent mortgage brokerages.

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While rising mortgage rates are forcing some lenders to downsize, the nation’s biggest wholesale mortgage lender says it’s growing market share by offering more competitive pricing to borrowers — and by helping persuade loan originators who work for banks and other retailers to defect to independent mortgage brokerage shops.

Pontiac, Michigan-based United Wholesale Mortgage (UWM) announced its “Game On” pricing initiative in June to boost market share and promote the mortgage brokerage business model. The pricing initiative brought UWM’s rates down by 50 to 100 basis points (0.5 to 1 percentage point) across all loan types, the company said.

Mat Ishbia

Mat Ishbia

Retail mortgage loan originators “have always known it’s hard for them to compete on price and rates with brokers and with service and technology support brokers have today,” UWM CEO Mat Ishbia said on an Aug. 9 call with investment analysts.

Game On is an “aggressive pricing strategy” that UWM hopes will be “the last nudge that we believe retail loan officers need to convert to being a loan officer broker shop or start their own broker shop,” Ishbia said.

UWM also announced a new service for mortgage brokers in June, Boost, that serves as a marketplace for them to purchase leads, stay in touch with past clients, connect with real estate agents and opt-in to receive live call transfers.

Ishbia said UWM is already reaping the results of those initiatives, pointing to a sharp rise in traffic to BeAMortgageBroker.com, a site UWM created to encourage retail loan officers, or anyone looking to get into the mortgage business, to launch careers as or with an independent mortgage broker.

During the first seven months of this year, BeAMortgageBroker.com attracted 515,000 visitors, up from 226,000 during all of 2021, Ishbia said.

“Just in June and July alone, since Game On, we’ve had over 329,000 people hit that website,” Ishbia said. “So just in the two months since Game On, we’ve had more people hit that website than all 2021.”

At the end of 2021, there were about 391,00 federally registered mortgage loan originators in the U.S., according to the Nationwide Multistate Licensing System. In its most recent annual report to investors, UWM said it had relationships with more 11,000 independent mortgage brokerage businesses with 45,000 mortgage loan originators. Of those originators, about 35,000 submitted a loan to UWM during 2021, the company said.

Last year, Ishbia said licensing data shows 6,353 mortgage loan originators switched from retail lending shops to mortgage brokerages. In the first seven months of 2022, he said 5,782 retail loan originators moved to brokerage shops, including more than 1,000 in July alone.

Given that those loan originators represent potential new sources of business for UWM, Ishbia estimates that mortgage brokers could double their current 20 percent market share in the years to come.

“We believe the broker channel will grow to 33 percent over the next five years,” Ishbia said. “However, with strategic initiatives like Game On, we think that number could reach 40 percent or higher. Meaning UWM would compete for four out of 10 loans, rather than just the two out of 10 loans we’re competing for right now.”

Ishbia said one factor that’s tilting the scale in favor of independent mortgage brokers is that rate volatility makes homebuyers more likely to shop around for the best deal. Since mortgage brokers work with multiple lenders, they can often help borrowers find lower rates.

“The average borrower will save $9,400 over the life of the loan by going through the broker channel compared to the retail channel,” Ishbia said, citing Home Mortgage Disclosure Act data. “It’s even better for minority borrowers who save about $10,400 using a broker.”

But for mortgage brokers who want to offer homebuyers a UWM loan, there’s a catch. Controversially, UWM won’t work with independent brokers who also send loan applications to rivals Rocket Mortgage or Fairway Independent Mortgage.

Downsizing through attrition

When loan officers formerly employed by retail lenders become independent mortgage brokers, they become another potential source of business UWM. But since UWM doesn’t employ those loan officers itself — they work for the lender’s clients, who are commission-based mortgage brokers — it can grow its business without growing its payroll.

In fact, UWM has been quietly downsizing through attrition, with about 500 employees quitting after Ishbia told workers last July that employees who were working remotely during the pandemic needed to return to the office, the Wall Street Journal reported Saturday.

During the pandemic-fueled mortgage refi boom, UWM added 2,600 employees, growing the company’s headcount from 4,900 at the end of 2019 to about 7,500 employees at the end of 2020, according to the company’s 2021 annual report.

In reporting second quarter earnings, UWM said total expenses were essentially flat from a year ago, at $348 million. But salaries, commissions and benefits were down nearly 20 percent from a year ago, the company said, due to decreases in bonuses and commissions attributable to “decreased loan production and a decrease in average headcount arising from normal attrition.”

Ishbia said UWM’s expenses will continue to shrink in the third quarter, as investments the company has made in technology create efficiencies.

“It’s not focused on letting people go, it’s focused on how do we make people more efficient, and handle the volume and make sure the service and loan quality, all those things are at the highest levels,” Ishbia said.

Last fall, UWM unveiled a new automated document recognition and processing platform, BOLT, that the company said would allow mortgage brokers to get initial approvals for qualified borrowers in 15 minutes.

UWM mortgage originations by purpose

UWM mortgage originations by purpose. Source: Inman analysis of company regulatory filings.

Although UWM saw second quarter loan originations fall 49 percent from a year ago, to $29.9 billion, Chief Accounting Officer Andrew Hubacker noted a 17 percent increase in purchase loan originations from the first quarter. At $22.4 billion, purchase loans represented 75 percent of total loan volume, up from 20 percent during the second quarter of 2020, when the pandemic was in its early stages.

With total gain margin of 99 basis points, up from 81 basis points a year ago, UWM boosted net income by 55 percent over the same period, to $215.4 million.
UWM said it expects third quarter loan production will total between $23 billion and $28 billion for the third quarter. Total gain margin is projected to drop to between 30 and 60 basis points, as UWM pursues its aggressive strategy to grow its market share, Ishbia said.

“There’s a lot of different ways to grow a business,” Ishbia said of the decision to make more, but less profitable loans.

Instead of spending $500 to $700 million to grow market share by acquiring a rival company, “I spend a couple of hundred million dollars in the gain on sale,” Ishbia said.

“We’re definitely looking at acquisitions, and I’m not saying we wouldn’t do that if the right opportunity was there,” Ishbia said. “However, this is a way to make it happen sooner, have much more certainty in the results, and organically control the results ourselves with the data and the information. And quite frankly, it’s a lot cheaper, right?”

The nation’s third-largest wholesale mortgage lender, Ann Arbor, Michigan-based Homepoint, announced last week that it plans to lay off more than 200 workers across the organization in a move to cut costs by more than $100 million a year.

Other major lenders moving to downsize include LoanDepot, which is exiting the wholesale lending business and is on track to lay off 4,800 workers in 2022, and Better, and end-to-end provider of mortgage financing, real estate brokerage services, and title and closing services that’s let go of more than 7,000 people.

Rocket Companies, the parent company of the nation’s largest provider of home loans, Rocket Mortgage, made buyout offers in April to approximately 2,000 workers aimed at generating $180 million in savings.

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Email Matt Carter

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