Rocket Mortgage rolls out “Inflation Buster” mortgage, which provides a lower rate for one year, as it battles rival United Wholesale Mortgage for homebuyer market share.

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Rising mortgage rates could hold a silver lining for homebuyers as competition between the nation’s biggest lenders heats up.

Rocket Mortgage on Friday fired the latest salvo in the battle for buyers, announcing a new “Inflation Buster” mortgage that gives homebuyers a lower rate — and lower monthly payment — during the first year of their loans.

A homebuyer taking out a $400,000 mortgage at 5.75 percent interest will save about $2,972 in the first year of the loan, Rocket Mortgage said.

In July, Rocket launched a Rate Drop Advantage program, which promises that if rates come down in the next three years, Rocket will cover some refinancing costs including first appraisal, credit report, tax certification and mortgage recording fee.

Bob Walters

“Rocket Mortgage is committed to creating solutions to combat today’s high inflation, making home purchases more affordable,” Rocket Mortgage CEO Bob Walters said in a statement. “The Inflation Buster pairs perfectly with [the] Rate Drop Advantage program, which covers many of the costs to refinance when interest rates fall. Combined, these put buyers in the driver’s seat with unmatched benefits.”

With rising mortgage rates scuttling its refinancing business, Detroit-based Rocket Mortgage is scrambling to do more business with homebuyers.

But the nation’s biggest mortgage lender is in a dog fight with United Wholesale Mortgage — the biggest U.S. lender working exclusively through independent mortgage brokers — for market share.

UWM announced a “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.

UWM — which is based down the road from Rocket Mortgage in Pontiac, Michigan — is looking to attract not only homebuyers with its aggressive pricing but to persuade retail loan officers to become independent mortgage brokers.

Mat Ishbia

Mat Ishbia

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,” UWM CEO Mat Ishbia said on an Aug. 9 call with investment analysts.

Rocket Mortgage says the lower payments provided by its Inflation Buster mortgage will be “automatically provided to any Rocket Mortgage clients who apply for a conventional, FHA or VA purchase loan.”

When homebuyers apply directly to Rocket Mortgage, the lower payments are provided by a special escrow account established by Rocket. But the company is also extending the offer to mortgage brokers’ clients through Rocket Pro TPO, with funding coming from the real estate agent or home seller.

Mortgage brokers who want to offer Rocket Mortgage’s Inflation Buster product face a dilemma. Controversially, UWM won’t work with independent brokers who send loan applications to Rocket Mortgage or Fairway Independent Mortgage.

Rocket and UWM’s battle for homebuyer market share is also drawing other lenders into the fray, even as rising rates force other lenders who were profitable during last year’s refinancing boom to downsize.

Last week, Rocket Mortgage announced that it would treat loans of up to $715,000 as conforming, even though an official announcement on an expected increase in Fannie Mae and Freddie Mac’s 2023 baseline conforming loan limit isn’t expected until November.

UWM quickly followed Rocket’s move, which will let many homebuyers avoid stricter underwriting requirements for jumbo mortgages when applying for loans exceeding the 2022 baseline conforming loan limit of $647,200 for single-unit properties.

Pennymac, the nation’s fourth-largest mortgage lender, has also followed suit, adopting Rocket’s $715,000 conforming loan limit for borrowers locking rates on or after Sept. 12. As with Rocket and UWM, Pennymac will treat loans of up to $1.073 million as conforming in Alaska and Hawaii.

Finance of America Mortgage, a nonbank lender that went public in last year’s SPAC merger craze, has also raised its baseline conforming loan limit to $715,000 and $1.073 million in Alaska and Hawaii as of Sept. 13.

While the competition among lenders for homebuyers may be a boon for consumers, rising rates have forced several lenders to downsize or close their doors.

Sprout Mortgage, which claimed to be the largest provider of “non-Qualified Mortgages” in the U.S., shut down without warning on July 6, leaving more than 300 employees out of work.

Another non-QM lender, First Guaranty Mortgage Corp., cut 76 percent of its workforce — 428 employees — on June 24, leaving not only employees but borrowers and lender partners in the lurch.

The nation’s third-largest wholesale mortgage lender, Ann Arbor, Michigan-based Homepoint, is in the process of laying off at least 913 employees 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, an end-to-end provider of mortgage financing, real estate brokerage services and title and closing services that has let go of more than 7,000 people.

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Email Matt Carter

homebuying | lenders
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