Broker's dispute with Quicken Loans highlights battle over borrowers

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Amid a tight housing market and rising rates, mortgage brokers and wholesalers have been engaged in an intense competition for control over borrower relationships.

That competition is becoming contentious.

One example of this turmoil is C2 Financial Corp., which recently made plans to stop submitting loan applications to the wholesale division of Quicken Loans. C2, which disclosed the Aug. 15 discontinuation for loan submissions in an email to brokers over the weekend, contends that the borrowers it originally brought to Quicken were being funneled to the Detroit-based lender's own retail channel for subsequent transactions, rather than being referred back to the San Diego-based broker.

For its part, Quicken disputes the claim.

"We will work with loan officers who want to work with us until they no longer send us business," Quicken CEO Jay Farner said in an interview. "Maybe they will change their mind, but all indications are that this is the decision they have made."

Executives from C2 did not respond to multiple requests for comment.

Neither side so far has offered immediately verifiable evidence to support their side of the story. But it is clear that the quarrel is just one more example of the increasingly open tension in the industry over whether the brokers that facilitate the initial loan transaction should "own" the relationship, or whether that right goes to the wholesalers that assume the risk of funding and servicing borrower loans.

As higher mortgage rates and constraints on housing inventory and affordability have put downward pressure on mortgage originations, competition for control of the customer has intensified. Third-party originators have formed a group called Brokers Against Wholetail Lenders aimed at sharing information about lenders' referral practices in response, and large traditional and online real estate companies like Remax and Zillow, respectively, have started or purchased their own mortgage business.

Although refinances are dwindling and only account for a little over one-third of weekly applications, they continue to play a larger role in referrals that are central to both real estate and mortgage companies. A year ago, refis represented nearly half of weekly applications.

"Everybody is trying to build some type of ecosystem where there is a user friendly path to communicate with their past customers," said Anthony Casa, president of brokerage Garden State Home Loans, founder of a new trade group called the Association of Independent Mortgage Experts and a promoter of BRAWL.

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Wholesale lenders Mortgage brokers Refinance Referral marketing Originations Quicken Loans