Reduced Rivalry in Mortgage Lending Will Cost Consumers

Too often, public policy and the regulatory environment ignore the practical impacts on consumers. However, policymakers and the government do not have a monopoly on creating these challenges.

Consider the fast-evolving mortgage lending industry. Like many sectors, the internet catapulted this sector forward with enhancements for businesses and consumers alike. These enhancements led to lower costs, shorter time-to-close, increased transparency, heightened competition and better services — all helping to drive massive market growth.

For example, Housing Wire published 2017 to 2020 monthly broker closing volume data that showed a sixfold increase in the addressable market in those four years. A competitive and growing market is a friendly market for consumers, but one of the largest players in the industry now threatens to tip the scales in favor of their bottom line in a way that could hurt consumers.

Despite rapid industry growth, wholesale mortgage giant United Wholesale Mortgage has experienced significant market share losses in the past couple of years thanks to increased rivalry in lending. Facing a battle on the playing field against strengthening market competition, UWM “issued an ultimatum to mortgage brokers” stating that independent brokers could no longer do business with them if they also partnered with either Fairway Independent Mortgage Corporation or Rocket Mortgage, according to a report by Housing Wire.

Whether you flip houses for a living or are a first-time home buyer learning the ropes, a Ph.D. in economics is not necessary to see how this corporate power grab will cost – and hurt – consumers. Less competition means higher prices.

Brokers have a unique position in the mortgage industry. Their valuable role is to shop the marketplace for the best loan and rate and determine which is the best fit for their customer. Brokers take pride in developing strong relationships to gain a comprehensive understanding of consumer lending needs.

By forcing brokers to limit the options available to them, UWM is undermining the very principle on which the broker channel exists. As one independent broker told Crain’s Detroit Business, a broker’s purpose “is to give our customers a choice.”

UWM will likely leverage these exclusivity agreements to enhance profitability and margin on a per unit basis, particularly critical for a company facing declining market share and Wall Street share price. For the consumer, this equates to fewer choices and less competition, which will hit their wallets with higher rates, increased fees, and worsening service.

More than ever, consumers are focused on individual brands and the actions they take. Erik Gordon, a professor at the University of Michigan’s Ross Business School noted this in the Detroit News: “This isn’t some high moral stance… Rocket must be doing something that appeals to some of the independent brokers, or United Wholesale wouldn’t have to make that threat.”

That is just the point. Many companies adopt a consumer-first strategy. In considering new product investments and enhancements to services, a consumer-first approach puts the end user in the center of every action of the business. However, the ultimatum by UWM effectively limits competition and takes away options for independent mortgage brokers, which makes taking care of consumers a secondary consideration.


Steve Pociask is president and CEO of the American Consumer Institute, as well as a leading consumer advocate who has published numerous economic studies for independent nonprofits, public policy institutions and the U.S. Small Business Administration. 

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