Rocket just fired all of its newly minted real estate agent/loan officers – surprising… nobody.
Before I explain this though, I want to touch on something I missed in this blog: If the Stock Market Crashes, What Happens to Real Estate?
In that blog, I mentioned how rates often fall when stocks crash – so the mortgage industry usually does well (with refis) when stocks crash.
But, real estate sales often slow down for a period (even if rates fall), as potential buyers lick their wounds and assess the overall economy.
A very seasoned real estate broker/owner, however, reminded me of something I missed. When stocks perform poorly, he sees many investors move into real estate to avoid the volatility of the stock market.
So, yes – there is a lag in real estate sales initially, but a volatile stock market can result in more sales after the lag period – if enough investors move from stocks to real estate.
Rocket Killed Its Realtor/Loan Officer Program!
Rocket Mortgage launched a huge program to license real estate and insurance agents to originate mortgage loans – with much fanfare.
“Woohoo, free money and referrals galore,” everyone at Rocket screamed.
But then … reality set in. The plan was to get real estate and insurance agents NMLS licensed so they could start mortgage loan applications on behalf of borrowers – and then legally get paid for referring those loans to Rocket (as a quick reminder it is illegal to directly pay anyone for a mortgage referral, unless that person is licensed and the payment is fully disclosed).
Note: I am sharing this story because numerous real estate brokerages are experimenting with similar approaches as a way to garner extra revenues during slow times.
Anyway – Rocket announced recently that they are going to shut down their origination channel for real estate agents. So – what happened?
- Licensing Is Too Hard. The NMLS licensing process is more difficult than many other licensing processes, and Rocket could not get the agents to pass the test.
- Loans Are Hard – Who Knew? Our biggest fear at JVM Lending is losing one of our seasoned Client Advisors. This is because mortgage lending can be extremely difficult, as there are far more nuances than anyone outside of the industry can possibly understand. Borrowers have hundreds of different questions and there are hundreds of other factors that impact qualifications, pricing, loan options, etc. There is no way a real estate agent who just got NMLS licensed could begin to spot relevant issues or answer questions accurately; years of training and experience are required.
- Margins Too Thin. This is the most competitive market … ever. Everyone is fighting tooth and nail for every single loan – often by competing with rates. As a result, margins are often way too thin to allow for the payment of a referral fee. If we had to pay even a small referral fee right now, we would either lose money on many loans or lose deals altogether if we charged slightly higher rates in order to be able to afford a referral fee.
There were other factors too, such as mortgage brokers (who send Rocket loans) complaining about the competition from the channel – but the above three reasons are and will always be why these attempts to turn real estate agents into quasi-loan officers or referral-fee machines never work out.
