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Limiting Competition in the Mortgage Industry Will Only Harm Consumers

Limiting Competition in the Mortgage Industry Will Only Harm Consumers

By Monday, 15 March 2021 03:34 PM Current | Bio | Archive

Competition is the foundation of our free-market economy and has helped build our nation into the global hegemon and force for good in the world that it is today. American capitalism though is only able to flourish when competition is encouraged – not banned – yet when it comes to the mortgage industry, it seems at least one CEO may disagree.

In an unprecedented and anti-competitive move, United Wholesale Mortgage (UWM) CEO Mat Ishbia in a Facebook Live event on March 4 announced his intention to ban mortgage brokers from working with two of UWM’s competitors, Rocket Mortgage and Fairway Independent. In order to maintain access to UWM’s products, brokers would be forced to sign a contract addendum preventing them from working with UWM’s competitors and agreeing to pay fines ranging from $5,000 to $50,000 if they are found to be in violation of the agreement. To make matters worse, brokers have been given less than two weeks to make this major business decision.

Curiously, Mr. Ishbia claimed that his competitors weren’t allowing brokers to grow their business and were even trying to “cut them out.” But Erik Gordon, a professor at the University of Michigan's Ross Business School, believes the move makes UWM look weak, which likely means it is losing business. "This isn’t some high moral stance. If you say something like 'you have to decide it’s us vs. them,' you’re worried about people shifting a little bit of their business. Rocket must be doing something that appeals to some of the independent brokers, or United Wholesale wouldn't have to make that threat."

Given everything that has happened within the industry recently, Mr. Gordon’s analysis is likely correct. Rocket’s newly launched national mortgage broker directory, for example, is part of the company's effort to expand options for home buyers and help brokers build their business. The company is also investing $100 million into the broker channel this year alone to further support these small business owners.

Such short-sighted market-distorting tactics will therefore only serve to harm consumers and put the entire mortgage broker channel at risk. Banning brokers from working with some of the top lenders in the mortgage industry will directly limit opportunities to expand their business and diminish their abilities to effectively serve their clients.These professionals who streamline the mortgage process and work to identify the lowest rates for homebuyers and homeowners looking to refinance, rely on the ability to freely shop rates from banks across the industry.

Ultimately, homebuyers, who will be left with fewer options will end up paying the price for these restrictive practices. The biggest part of the average American's budget goes toward housing, which accounts for about 37% of take-home pay. In this time of record low inventory and record high home prices, many people are forced to spend even more. Given the fact that homebuyers lose over $23,000 in spending power on average when mortgage rates jump from 2.75% to 3.25% (a mere half basis point) they don’t need anti-competitive policies like this running up the tab.

As we have seen time and time again and across industry after industry, competition in the market helps keep costs low for consumers. With mortgage rates starting to rise, the industry should be finding ways to innovate and introduce more choices for consumers instead of restricting competition. If UWM continues down this current path the burden will ultimately fall upon consumers who could end up paying a hefty price.

Dan Perkins is an author of both thrillers and children’s books. He appears on over 1,100 radio stations. Mr. Perkins appears regularly on international TV talk shows, he is current events commentator for seven blogs, and a philanthropist with his foundation for American veterans, Songs and Stories for Soldiers, Inc. More information about him, his writings, and other works are available on his website, DanPerkins.guru. To read more of his reports Click Here Now.

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DanPerkins
Competition is the foundation of our free-market economy and has helped build our nation into the global hegemon and force for good in the world that it is today. American capitalism though is only able to flourish when competition is encouraged - not banned - yet when it...
mortgage, rocket, fairway independent, competition, united wholesale mortgage
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