I saw a surprising announcement yesterday that the largest residential real estate company was starting a mortgage arm. This mortgage arm will work closely with its realtors throughout the country to provide a “one stop shop” for home buyers. What does this mean for other mortgage originators (banks, mortgage professionals, etc…) when one of their typically largest referral sources is now squarely a competitor?
Yesterday Remax announced that it is staring a mortgage operation called Motto Mortgage. According to their press release: “Motto Mortgage will open mortgage franchises throughout the U.S. increasing competition in the industry, resulting in more choice and a better experience for consumers. Its loan originators will work with real estate offices so that agents can help homebuyers obtain the mortgage loans that best fit their individual needs.”
This announcement should not be taken lightly as remax is the largest residential brokerage firm and has over 100k agents working under its flag. Each agent now will no doubt have financial incentive to now use their “in house” financing arm. I was actually quite surprised with this announcement yesterday since one of the large initiatives by the consumer financial protection bureau is ensuring that realtors/mortgage professionals do not receive compensation/kickbacks from referrals or “steer their clients” to preferred providers.
Even though a realtor is not a service provider per Respa, this could get very interesting if Remax agents are given large incentives to refer clients to their mortgage arm which I assume they will. The mortgage franchises are going to be “sold” to the realtor franchisees (or they likely will setup separate entities) which will create this incentive for cross selling of products. I find this even more surprising after the Well’s Fargo scandal involving cross selling which led to huge fines, lawsuits, and a big headache for the bank. I’m not sure how in practice they are going to refer clients without getting caught up in the same drama.
As a banker or mortgage professional this also creates an interesting dynamic since many bankers/mortgage professionals routinely refer clients to realtors. This begs the question would a banker or mortgage pro now refer a transaction to a ReMax agent with the knowledge that this client will now be “cross-sold” a mortgage product? This recent announcement could drastically shake up the mortgage market and I wouldn’t be surprised to see other large brokerages (keller williams, Coldwell banker, etc…) follow suit with their own product once they see how the ReMax experiment pans out.
- The Denver Post: Remax starting motto mortgage
- REMax press release: remax site
- Housing Wire: ReMax getting into the mortgage business
- Consumer finance protection Bureau: RESPA/ TRID rules
- The Wall Street Journal: What the Well’s Fargo Cross Selling mess means for banks
Written by Glen Weinberg, COO/ VP Fairview Commercial Lending. Glen has been published as an expert in hard money lending, real estate valuation, financing, and various other real estate topics in the Colorado Real Estate Journal, the CO Biz Magazine, The Denver Post, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications.
Fairview is a hard money lender specializing in private money loans / non-bank real estate loans in Georgia, Colorado, Illinois, and Florida. They are recognized in the industry as the leader in hard money lending with no upfront fees or any other games. Learn more about Hard Money Lending through our free Hard Money Guide. To get started on a loan all they need is their simple one page application (no upfront fees or other games).