Op-Ed: UWM’s MortgageMatchup.com Could Be Problematic
By JARED WHITLEY
Where’s the line between sound business strategy and ethical violations? What’s the difference between vertical integration and breaking the law?
Those are the questions being raised about a United Wholesale Mortgage (UWM) website called MortgageMatchup.com.
The Consumer Financial Protection Board (CFPB) is in the process of determining how the Real Estate Settlement Procedures Act (RESPA) should apply in the digital age. Originally intended to help homeowners better educate themselves while shopping for homes 50 years ago, RESPA requires lenders and others to disclose conflicts of interest to borrowers, with the goal of eliminating kickbacks and referral fees that could add to the already high costs of settlement services.
Last year, the CFPB issued an advisory opinion to address RESPA’s applicability to digital technology platforms where consumers comparison shop for mortgages, but the platform might steer them toward preferred brokers – rather than the best one. Does the consumer know they’re being nudged toward a provider? Does the homebuyer know there’s a financial benefit to the website or app that’s sending them there?
As detailed in a National Law Review piece earlier this year, John Henson said platforms are allegedly violating RESPA if:
1. The platform non-neutrally presents info about settlement service providers participating on the platform
2. Non-neutral presentation of the info steers consumers to use that settlement service provider
3. The platform operator receives a payment for the referral
These rules would appear to apply to MortgageMatchup.com, a lead-generation arm of UWM that presented mortgage brokers based on the lending giant’s own ranking system. The issue was included in expose efforts by Hunterbrook Media, which is openly critical of UWM.
For the average homebuyer to be able to connect with brokers is essential – one reason it’s so important to avoid conflicts of interest. Abuse of information advantages in the real estate industry has long been a problem, highlighted by Freakonomics many years ago.
The CFPB was itself created to battle such abuses, regulating industries that everyone felt had run amok for too long.
“The CFPB was created first and foremost to prevent the kind of mortgage industry abuses that led to the 2008 real estate market collapse, so RESPA violations are always going to be a top priority for the agency,” said former CFPB enforcement attorney Ron Rubin.
“If the CFPB’s enforcement attorneys determine that UWM was hiding its financial incentives to steer homebuyers to specific mortgage brokers on its platform – and from the reported facts that seem likely – it will be an extremely expensive problem for the company, even under a Republican administration.”
But even if the CFPB doesn’t bring the heavy hand of the law down on UWM, the implications alone may be damaging to its reputation.
“From a marketing perspective on RESPA (Real Estate Settlement Procedures Act) violations in the mortgage space of how non-compliance impacts both brand reputation and customer trust will be a hot button,” NYU marketing instructor Angelica Gianchandani said. “Positioning transparency as a core brand value and educating customers about the RESPA guidelines can enhance consumer confidence and differentiate ethical lenders from those engaging in questionable practices… RESPA violations can quickly lead to negative media coverage, which can erode or deteriorate customer loyalty and brand equity.”
Hunterbrook is an affiliate of a hedge fund shorting UWM. Henson says that, regardless of UWM’s situation, it’s still “somewhat disingenuous that Hunterbrook spends thousands of words blasting UWM and then at the end of it says, oh, yeah, our affiliate is shorting this company.”
The service brokers provide is essential, as is trust.
“Mortgage brokers, on the whole, are good for consumers,” Henson said. “Mortgage brokers give consumers the ability to not be limited by geographic constraints to the bank down the street. I believe that the numerous mortgage brokerages that rely on UWM are positive for the industry.”
Jared Whitley has written about politics and public policy for many publications, including Real Clear Politics, National Review, and the Washington Times.