
Over four days in late June, Detroit’s Rocket Mortgage staged the sixth annual Rocket Mortgage Classic, the only PGA Tour event hosted in the Motor City.
With nearly 2.5 million viewers tuned in to CBS Sports during the final round at the Detroit Golf Club, the Rocket Mortgage Classic exposes a national audience to a Detroit they may not know.
It also serves up a heavy dose of goodwill and awareness of its namesake parent, which is the country’s third largest mortgage lender.
As a measure of metro Detroit’s standing as the nation’s mortgage capital, in July executives and 100 broker partners from United Wholesale Mortgage, the country’s No. 1 mortgage lender, rang the bell at the New York Stock Exchange to celebrate National Mortgage Brokers Day.
Those brokers are in addition to some 600 of their colleagues who descend on UWM’s Pontiac campus every week for training, networking, and to learn about new products.
“That was pure excitement for the brokers,” says Alex Elezaj, UWM’s chief strategy officer. “You tend to hear a lot of doom and gloom when you read media reports about real estate and lending, but we’re very optimistic. We’re excited about the back end of 2024, and we’re very excited about 2025 and 2026.”
Such an optimistic outlook isn’t typical among their peers, but Rocket Mortgage and United Wholesale Mortgage aren’t conventional enterprises.
They’re two of the three largest non-bank mortgage lenders in the country, with a collective 14.2 percent share of the U.S. mortgage market.
Seemingly unaffected by market conditions, UWM posted first-quarter 2024 loan origination volume of $27.6 billion, with 24 percent more loans originated than during the same quarter in 2023, and $180.5 million in net income, compared to a $461 million loss in the same period a year earlier. The company expects second-quarter loan volume to be in the $28 billion to $35 billion range.
On the other hand, Rocket Cos., the Detroit-based fintech platform company that includes mortgage, real estate, and personal finance businesses, reported first-quarter 2024 net income of $291 million on $1.4 billion in total revenue. The company posted $20.2 billion in loan origination volume, a 19-percent increase over the first quarter in 2023.
As two powerhouses in the industry, Rocket Mortgage and UWM today find themselves in the right place at the right time.
“We’re in the era where non-banks are dominating the mortgage market, and Rocket Mortgage and UWM epitomize that,” says Guy Cecala, executive chair of Inside Mortgage Finance.
“They have pretty different strategies. Rocket mortgage was basically a call center lender that advertised aggressively and promoted technology that would help the borrowers get access to their products, but had more or less been what we call a retail lender. United Wholesale is the complete opposite, in that they deal exclusively with brokers.”
It’s noteworthy that the two companies’ performance in the mortgage market has taken place against stressful market headwinds — what The Wall Street Journal calls a “frozen housing market that is warping the economy.”
Existing home sales in the U.S. fell in June as the median sales price climbed to $426,900 — marking the highest price ever, according to the National Association of Realtors.
Locally, the median home sales price in Wayne, Oakland, Macomb, and Livingston counties increased by 7.5 percent in July to $340,650, says Jeanette Schneider, president of RE/MAX of Southeastern Michigan in Troy. Residential sales were up 3.4 percent year-over-year in July, following a 15 percent drop in June.
Buyers currently earning $100,000 a year can afford to buy 37 percent of the listings in the country, a stark contrast to the 62 percent of listings they could afford in 2019. A nationwide inventory shortage of 4 million homes — 160,000 in Michigan — complicates the matter.
Add to this situation the current 30-year fixed mortgage rates that are keeping people in their homes. Two-thirds of outstanding U.S. mortgages have an interest rate below 4 percent, according to Morgan Stanley’s housing strategist Jim Egan. Though far from the dizzying 16-percent 30-year rates of 1981, today’s rates of around 7 percent make it difficult to move up or refinance.
The good news is if a homebuyer has a $3,000 monthly budget, they can afford a $447,750 home with a 6.85 percent mortgage rate (current at the time of this writing), according to Redfin, a real estate website. That buyer has realized $22,250 in additional purchasing power since mortgage rates hit a five-month peak in April, when they could have bought a $425,500 home with an average rate of 7.5 percent.
“We continue to see listings grow all the way from the first-time homebuyer to jumbo mortgages in the million-plus dollar range, and construction is up a little bit,” says John Lambrecht, owner/broker at Lambrecht Realty, which has offices in Grosse Pointe Farms and Troy. “At some point, if someone is ready to buy a house, the difference between 5, 6, and 7 percent may not be very great on their budget, but once you own the home you can take advantage of lower rates in the future and refinance.”
Real estate agents call the concept “Marry the house, date the rate.”
“While there are certainly people who want to hold onto their lower interest rates, there’s been a big growth in homeowners who take out a home equity loan,” says Austin Niemiec, chief revenue officer at Rocket Mortgage. “Homeowners are sitting on $17 trillion in home equity, and many may not realize that tapping into this equity is an option without sacrificing a lower mortgage rate. Rocket’s first-quarter home equity loan volume (this year) has grown three and a half times since the first quarter of 2023.”
While metro Detroit is the nation’s mortgage capital, it also leads the way in digital mortgage innovations. Still, the epicenter of the overall technology sector remains in Silicon Valley, according to National Mortgage News.
The industry publication states Rocket Mortgage “has been the catalyst for the wave of new point of sale system implementations,” while other mortgage companies around the state are pioneering new technologies to advance digital transactions.
Meanwhile, Lake Michigan Credit Union in Grand Rapids offers another sector of mortgage lending.
“We like the business, we’re committed to it, and therefore we end up doing pretty well in it,” says Eric Burgoon, executive vice president and chief lending and experience officer at Lake Michigan Credit Union. “Overall, our business is up 10 percent, and we’ve gained some market share this year.
“Credit unions don’t generally do a lot of mortgage business because it takes investment in scale to be successful. You have to set up mortgage servicing on the back end to collect taxes and insurance. A group that pools and sells mortgages on the secondary market is critical. We’re big enough to compete in the mortgage business, but still small enough and cost-effective enough that we can be nimbler than the bigger banks.”
Burgoon says he sees two major buyer groups: young first-time buyers and those who are nearing retirement and want to build their dream vacation home. LMCU’s construction lending is up 10 percent in response to these multimillion-dollar projects.
Detroit’s mortgage industry, meanwhile, has been dynamic.
In 2018, Quicken Loans, the predecessor to Rocket Mortgage, was already listed as the nation’s third largest lender with $86 billion in volume, as tabulated by Inside Mortgage Finance. United Wholesale Mortgage was No. 12 that year, with $29.5 billion, and Troy’s Flagstar Bank was ninth. Flagstar ranks 23rd at the time of this writing.
In 2022, New York Community Bancorp Inc. acquired Flagstar in a $2.6 billion merger, promising a “diverse revenue and earnings stream; an expansive retail banking network; (and) industry-leading positions in several national lines of business, including multi-family lending (and) residential mortgage origination.”
The merger was fraught with difficulties, though, including the fact Flagstar had “admitted, acknowledged, and accepted responsibility” for improperly approving residential home mortgage loans, according to an April 2024 letter from Sen. Elizabeth Warren and Sen. Richard Blumenthal to the Office of the Comptroller of the Currency.
In late July, Texas-based Mr. Cooper Group announced it was set to acquire Flagstar’s mortgage servicing portfolio and third-party origination platform. According to Inside Mortgage Finance, the non-bank Mr. Cooper Group will pay $1.4 billion to New York Community Bank for the assets.
Third-party originations account for the bulk of Flagstar’s production, says Inside Mortgage Finance. In the second quarter of 2024, Flagstar originated $4.6 billion in mortgages, with 73.3 percent coming through third-party channels.
“The big banks have a love-hate relationship with the mortgage market, and they’ve had that for 50 years,” says Inside Mortgage Finances’ Cecala. “At one point they decide they want to be big in the mortgage market and go after business, and then they dial it back. After the (2008) financial crisis and the housing crisis, which decimated the wholesale market and non-banks, banks easily started to dominate the market again, particularly as jumbo mortgages started to grow.
“That helped accelerate the dominance of large, commercial banks in the mortgage market. But five or so years ago, the non-banks started picking up market share, particularly in a low-interest-rate environment, and did very well.”
High interest rates and fewer homes on the market have resulted in an oversupply of real estate professionals and a dearth of mortgage loan officers. The National Association of Realtors counts 1.5 million active agents in the country, but there are 1.3 million listings.
According to Ingenius, a mortgage analytics and consulting firm, the total number of mortgage loan officers who closed at least one loan in the previous 12 months peaked at 178,270 in June 2021. By January 2024, that figure had fallen 47 percent, to 93,938.
“We’ve lost a lot of loan officers who probably shouldn’t have been in the business,” says Brian McGowan, assistant vice president of mortgage operations at Michigan First Credit Union, and vice president of the Michigan Mortgage Lender Association state board.
“When rates were very low, a lot of times when the phone rang, you picked it up and you got yourself a mortgage. They didn’t represent borrowers well. Most lenders now are taking a very advisory approach with borrowers. The more we can educate people about all aspects of a mortgage that pertain to them — why costs are the way they are and how interest rates work — the better position they’re in to make an informed decision.”
McGowan says advances in fintech, specifically artificial intelligence, hold great promise. “We’re all looking to disrupt how we’ve done things,” he says. “Today, the biggest conversation we’re having with other lenders and vendors is AI.
“We’ve looked at large language models to create content on the sales side. How do we manufacture loans with a greater certainty in the data that we’re using (such as) credit, income, and asset information? This has typically been provided manually — the loan officer talks with the borrower, that data gets passed up the chain to your operations teams and the underwriters to review and approve the loan, and then manual files are sent around the industry.
“Do I need your pay stubs, or do I need ADP? Can I get your tax returns directly from the IRS? From a fraud standpoint, we create a little more certainly around the data behind all the decisions. AI can look for large bank deposits that might need to be addressed. It can look for derogatory credit.”
McGowan says Michigan’s mortgage lending community is respected in the industry.
“When we attend conferences, there’s a focus on what happens in Michigan,” he says. “We do a lot of things that a lot of other state associations try to model, like the way we collaborate.
“We have every type of lender; they’re competitors, but we welcome their perspective. We all advocate positively in Washington, D.C., and Lansing for the mortgage industry and for borrowers. I don’t think you see that collective effort just anywhere.”