Rocket Mortgage will fight UWM’s ‘ultimatum’ with its wallet

Rocket Pro TPO, the wholesale arm of Rocket Mortgage, wants to court brokers from its competitor United Wholesale Mortgage even if it means covering legal costs to bring them over

“Starting today, we stand behind brokers who want to use Rocket or Fairway [Independent Mortgage Corporation], but fear Mat Ishbia‘s lawyers,” Mike Fawaz, EVP of Rocket Pro TPO said at the lender’s Ignite Live sales event with brokers on Monday.

Fawaz’s comments on Monday come nearly two years after UWM gave brokers an ultimatum to choose between the Michigan lender or Rocket Pro TPO and Fairway. In May 2021, UWM’s CEO Mat Ishbia asked brokers to sign an “All In” agreement by pledging to stop working with Rocket or Fairway. He said the lenders were inhibiting mortgage brokers from growing their business. Those who decided to work with either Rocket or Fairway could no longer send loans or applications to UWM. 

Rocket is willing to indemnify brokers who choose to work with us — or even Fairway. This includes covering the anticompetitive Ultimatum penalties and resulting court costs that UWM attempts to hold you hostage with,” Fawaz said.

The decision was not just targeted towards UWM but to the broker community, Fawaz said in an interview with HousingWire.

“Maybe at the time when the ultimatum went out, the market was busy and people made decisions without thinking through what happens when the market changes. The market has changed. (…) Optionality and freedom becomes more and more important,” he said.

Since the financial penalty is removed, the ultimatum is – in effect – null and void, Rocket Mortgage said.

UWM declined to comment on Rocket’s decision.

In an interview, Fawaz said Rocket hasn’t thought about how much cost would incur to support the decision. He said the ‘bully shield’ initiative, as it has been dubbed internally, was “really a drive towards doing the right thing.”

Rocket won’t need to look under the couch cushions for the money.

The company’s SEC filing indicated it ended the third quarter of 2022 with a “strong liquidity position,” which includes $800 million of cash on hand, $3.2 billion of corporate cash used to self-fund loan originations, a portion of which could be transferred to funding facilities – warehouse lines, which used to fund loan originations.

On the heels of mortgage rates climbing to more than double than what it was in the beginning of January 2022, Rocket lost its origination crown to UMW in the third quarter. 

UWM originated $33.5 billion in the third quarter, beating Rocket’s $25.6 million in production, led by its Game On pricing initiative that cut 50 basis points across all mortgage products in July. The trend continued into the fourth quarter, during which UWM originated $25.75 billion in mortgages, according to Inside Mortgage Finance. Rocket posted about $19.7 billion in volume during the fourth quarter.

More than 17,000 loan officers joined the mortgage broker channel this year, with about half of them coming from the retail channel, Ishbia told analysts in its latest third quarter earnings.

“We’ve had thousands of brokers do business with us,” Fawaz said, adding that “hundreds” joined in January since the lender introduced $0 credit report fees to brokers.