Mortgage Lending

Trading MCA for Mortgages

June 5, 2024
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house on cash“I like multiple ways of getting business,” said Julio Sencion, Principal at Alta Financial. “If I did one thing and one thing only and that slows down, it affects my bottom line, so I like to keep my doors open for more opportunity and I think the ISOs should as well.”

Sencion’s not funding MCAs today, he’s doing mortgages, a business he had been in for years prior to the Great Recession. In the early 2000s, he said that everyone wanted to be a mortgage broker, himself included when he got into it. Like many in that business at the time, the fallout of it all pushed him to seek out a new revenue stream and a product that was still in demand. By 2011 he and a partner were running a large MCA brokerage shop in New York with nearly 70 sales reps on the floor. Sencion liked the business but not necessarily the conversion rates on the leads he was buying. By his count only 2-3% of the leads would become a funded deal, a metric deemed too low in the industry era of yesteryear. Old habits die hard, however, because he couldn’t help but continue to think like a mortgage guy.

“We realized that we had a couple of different questions on our application, one of them was ‘Do you own real estate? Commercial, residential?’ 40 to 50% of our clients owned real estate, so because of that we spun off a division for commercial lending.”

By 2016 Sencion exited MCA and went back into traditional finance. He’s now a principal at Alta Financial, which not only does mortgages but has also found a unique niche to source borrowers from, MCA brokers.

“So let’s say for example you’re an ISO and the client says ‘yes, I own real estate’ I’ll be interested in looking at that product,” Sencion said. “Then you will click a link that we will give you, that link will open up the questionnaire and you will fill out that questionnaire and then my agent will receive that lead from that questionnaire with all the data in it.”

Referrals of this nature in the biz are not new, but perhaps the circumstances are. One of Sencion’s account managers, Jamie Schiff, is also a former MCA rep himself, and he’s found this business to be better.

“I think over the past a year and a half, from my perspective, I think the MCA space is just a bit saturated,” said Schiff. “There’s a million and one funders out there.”

The challenge with this different product, according to Schiff, is getting an MCA broker to wrap their mind around a deal that could take a month to close when they might be used to 2-3 days. But on the upside Alta Financial does all the work and they really just want a broker to qualify a lead and submit the details. If a loan closes the broker gets paid. Quite a number of MCA broker shops are already doing this with them, the company said. Once these files are in hand, they underwrite various factors including credit score of the borrower. While just about any kind of property could qualify except for gas stations, they said that multifamily properties are the most common they get.

“People will be surprised how many clients have real estate, not just a [primary home], but they own just a small multifamily down the road that they never touched or tapped into,” said Sencion. “So I think it’s important nowadays to have the ISOs ask the question because if they didn’t do the cash advance they could always flip this into a mortgage.”

While all of Alta’s loans are secured by real estate, they can look beyond the value of the asset by evaluating an applicant on the rental income they generate or look at the average revenue from their business bank statements and base a loan amount off of that. Naturally, the rates and terms are much more attractive than what’s available in the unsecured market. There’s also the added benefit of these products being able to work alongside an MCA or to buy out existing ones. It’s a commission a broker might not have gotten otherwise.

“I’m actually excited, it’s something different but it’s kind of the same,” said Schiff. “And it’s such a smaller space that I don’t have to worry about every other month 10 other new funders popping up…”

As for Sencion, he said that the barriers to entry are higher than the MCA business, between the education, state licensing, how to process the files, etc.

“It takes years to get to the level of where we’re at, to be able to underwrite, fund deals, sell to a secondary market,” said Sencion. “And I think that’s where the edge comes in, you can’t get a cash advance guy, no matter how big they are, to get into my space unless they team up with a mortgage company. No one’s out there trying to become a mortgage company anymore like it was back then.”

Mortgage Brokers: pick a side

March 5, 2021
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boxing matchUnited Wholesale Mortgage (UWM) and Rocket Mortgage are still going at it, this week heating up to a new boiling point.

UWM announced on Facebook Live Thursday that it would not partner with brokers who work with Rocket Mortgage or Fairway Independent Mortgage Corp. CEO Mat Ishbia gave brokers until March 15th to sign a loyalty document to pledge their allegiance to the UWM team.

“If you work with them, can’t work with UWM anymore, effective immediately,” Ishbia said. “I can’t stop you, but I’m not going to help you, help the people that are hurting the broker channel, and that’s what’s going on right now.”

After competing Superbowl ads, it looked like the competitors were peacefully building broker networks, but now brokers have to pick a side. Rocket Pro TPO VP Austin Niemiec told the Housing Wire that UWM is attempting to manipulate the broker market.

“What UWM is attempting to do is really manipulate the market and have brokers swear allegiance to one company and literally give them financial penalties if they don’t listen to them,” Niemic said. “That harms their ability to compete, and it harms the consumer. Make no mistake about it, this was a move to benefit one company and one company alone, UWM.”

The feud comes after the stock price of Rocket Companies, Rocket Mortgage’s parent company, spiked in price. Founder Dan Gilbert briefly placed number 16 in Bloomberg’s Billionaire Index.

Super Bowl Sunday: Battle of the Mortgage Brokers

February 2, 2021
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Super Bowl Lending CompetitionThis Sunday in Tampa Bay, the Chiefs, and the Buccaneers will duke it out, while a second mortgage-based rivalry plays out in the ads between plays.

A year ago, millions watched as Rocket Mortgage and United Wholesale Mortage (UWM) went head-to-head with competing multi-million-dollar ads. This year, they will both return, but it looks like they might play nice after a grueling pandemic.

Last year, Rocket appeared for their third consecutive Super Bowl, but then in an upset came the #BrokersAreBetter ad campaign. UMW called out their biggest competitor: “Playing with rockets is great when you’re a kid, but when it’s time to get a mortgage, you quickly realize a rocket is complicated and expensive,” and promoted

It was a jab that earned millions of tweets, but this year Rocket has a chance to reply, and “double down” with two ads, this time highlighting local brokers as well. Rocket Companies today launched a national mortgage broker directory on its website.

“The directory not only includes the 43,000 individual loan officers who work with us but every mortgage broker in the country,” said Austin Niemiec, the executive vice president of Rocket Pro TP, in a statement. “This new resource is not about us; it’s about giving consumers more choice and assuring they know how an independent loan officer in their community can help them.”

UWM is also running an ad showing an imaginary tinder-swiping house hunting app, again featuring the directory.

“We believe we’re the one genuine partner of mortgage brokers nationwide,” said Sarah DeCiantis, chief marketing officer of UWM, in a statement. “We thought this ad would not only be relatable and entertaining given the pandemic’s acceleration of online dating but also educate consumers that brokers are their number one resource for finding a mortgage that fits their financial situation.”

Both firms are deciding to buy ads while other major brands are pulling out; For example, Budweiser’s decision to put ad money toward covid vaccine distribution. These brands will be saving money, as a 30-second spot during the Super Bowl runs for an estimated $5.5 million, the AP reports.

Next year’s Super Bowl 56, will be played in SoFi Stadium.