Today, RE/MAX Holdings announced the launch of a new one-of-a-kind franchised mortgage brokerage known as Motto Mortgage.
In a nutshell, the plan is to create a one-stop shop where home buyers can work with real estate agents and mortgage lenders all in one place.
The hope is to create a more seamless home buying experience by putting loan originators in real estate offices nationwide. Well, they say in close proximity to real estate offices.
But instead of pairing agents with loan officers from Bank X, they’ll have access to a wide variety of loan products because they’ll be working for mortgage brokerages.
Motto Mortgage Wants to Disrupt and Innovate the Industry
The company claims its mortgage brokerage franchise model is the first of its kind here in the United States, and hopes to “disrupt and innovate the industry.”
They say they’re a “different kind of mortgage company,” presumably because they’re combining a franchise model with a mortgage brokerage.
Generally, mortgage brokers are smaller independent shops that don’t have a nationwide presence so I suppose it’s unique in that sense. The franchise model is also apparently new. As such, each location will be independently owned and operated.
RE/Max CEO, Chairman and Co-Founder Dave Liniger noted in a release that the mortgage broker share of mortgage originations has plummeted since the housing crisis.
According to their numbers, it hit a high of 35% in 2006, around the same time the housing market peaked, before falling to just 10% in 2015. It was actually even lower than that in some preceding years.
In any case, it’s still well below the 15-year average of 22%, and Motto Mortgage wants to change that.
Liniger highlighted some of the pros to working with a mortgage broker, including the fact that they have many more loan choices than a single bank.
For example, one broker can shop your loan with dozens of different banks to find the right fit.
If they need to close especially quickly, they might choose Bank A. If they need to close a particularly tricky loan, they might choose Bank C instead.
They also expect customer service to be better with loan originators arranging financing in the very same offices where the real estate agents work.
Or it can all go horribly wrong…just kidding.
Real Estate Agents Often Determine Your Financing Options
A while back I pointed out that real estate agents have a big influence on who a home buyer will use for financing.
In fact, nearly half of home buyer decisions seem to be dictated by the real estate agent and their “preferred lender.”
This means buyers tend to go with whomever their agent recommends. This usually begins with the urging of a pre-approval from said lender, and eventually financing.
Of course, you are under no obligation to use their lender, and you’d be doing yourself a disservice to not shop around and look at other options.
That is perhaps the downside to this setup. If home buyers don’t look beyond their real estate agent’s recommendation, they won’t know what else is out there. Perhaps a lower rate and fewer fees.
However, the fact that Motto Mortgage will operate as a mortgage broker means the borrower will still have more choice than if they work with a single bank or lender.
The question is what happens to the existing mortgage broker partnerships at RE/MAX offices. They might be the collateral damage unless they choose to link up with Motto Mortgage.
For the record, RE/MAX was founded in 1973 in Denver, Colorado and has more than 100,000 agents in more than 100 countries worldwide.