UWM’s Hardball Tactics Hurt Homebuyers and Our Economy
COMMENTARY
As COVID raged, and mortgage rates plummeted, last March my husband and I found ourselves unexpectedly in the market to purchase a new home just a few weeks before the birth of our daughter. Even though we thought we saved enough for a down payment and the thousands in additional fees that come with purchasing a home, it was still a mad scramble at the end when it looked like the rate we thought we secured went up. Thankfully, our broker was able to find us the rate we needed to afford our home and we moved in just five weeks before I gave birth.
After that experience, it was shocking to read that United Wholesale Mortgage, one of America’s largest mortgage providers, gave an ultimatum this month to brokers who do business with certain competitors: you can work with UWM or its competitors, but not both. This has understandably drawn sharp criticism, and for good reason. It turns out making it harder for home buyers to get a lower mortgage rate isn’t the winning business model that CEO Mat Ishbia had imagined.
In a Facebook Live video UWM’s CEO said that in order to be able to work with the company, brokers are now required to sign an agreement to not work with Rocket Mortgage or Fairway Independent Mortgage. If a broker wants to work with either company, they are now essentially blacklisted by the industry’s largest wholesale mortgage provider.
Buying a home is one of the biggest decisions individuals and families will make, and most households’ wealth is largely tied to property values. When housing prices go up—which happens when demand is up—so too does consumer confidence and spending.
When the real estate market is growing, people are more likely to spend on other goods or even borrow against the value of their home to pay off debts, make renovations or supplement their savings. Greater demand also drives construction, which contributed $1.15 trillion of economic activity in 2018. But when home values fall because there are fewer buyers in the market, people are less likely to spend, and more likely to hold off on making personal investments and other purchases.
It’s critical for home buyers that competition among mortgage lenders exists and UWM’s ultimatum ultimately hurts consumers the most. A tenth of a percentage point difference on an interest rate could mean the difference of tens of thousands of dollars over the course of a home loan.
Home buyers benefit when lenders compete, which helps ensure they are getting the best products and rates. An open market allows consumers to compare rates, understand their options, and make informed decisions to maximize their value. That, in turn, supports economic growth because buyers have access to the most competitive terms, which drives demand in the housing market and beyond.
The opposite is true, too. If brokers are artificially cut off from certain mortgage lenders, they will offer fewer options to consumers. Buyers may not get the best rates, which would lead to higher mortgage costs and could negatively impact the housing market. That doesn’t only hurt potential home buyers, it also diminishes value for current homeowners.
The mortgage industry, homeowners, and the U.S. economy have benefited from decades of competition among lenders. The housing market is too critical to our entire economy for lenders to try to strong-arm one another for quick gain.
There’s an old saying that when bulls fight, the grass loses. In this case, UWM is the antagonistic bull and consumers are the grass.
Brokers and consumers should call on UWM to rethink its dangerous and potentially costly proposition, or vote with their feet and choose lenders that are willing to give consumers the opportunity to get the best rate.
Lauren Gorey served as a senior advisor to the U.S. Secretary of Commerce Wilbur Ross.
