Rocket unveils "Bully Shield" in UWM broker war

Rocket Pro TPO is unveiling a "Bully Shield" to protect mortgage brokers breaking ultimatum agreements with United Wholesale Mortgage, in a scathing rebuke of the competitor and its outspoken leader.

UWM two years ago said it wouldn't purchase loans from brokers who work with Rocket or Fairway Independent Mortgage Corp., a controversial mandate that carries contractual financial penalties. Rocket Pro TPO on Monday announced its initiative, which will indemnify brokers with UWM who choose to work with it or Fairway, covering their penalties and any court costs in any UWM litigation.

"There's no other way to put it – the ultimatum is immoral, reduces broker incomes and increases the rates the clients of brokers will pay," said Mike Fawaz, executive vice president of Rocket Pro TPO.

The "Bully," Fawaz said, is Mat Ishbia, president and CEO of UWM who issued the ultimatum in a Facebook Live presentation in March 2021. The vociferous boss has led UWM to new heights atop the industry with aggressive pricing strategies and tactics. 

"He knows small brokers don't have the financial ability to fight UWM in court and he counts on that fact," said Fawaz. "He is the playground bully taking the smaller kid's lunch money. Well, there is a bigger kid in the playground. Rocket is that bigger kid."

A representative for UWM declined to comment Tuesday. Executives for UWM were also mum on the issue on social media, instead congratulating Ishbia Tuesday on completing his $4 billion purchase of the National Basketball Association's Phoenix Suns.

The UWM ultimatum dictates that if brokers or their employees breach the agreement, they are liable for "liquidated damages" of $5,000 per loan closed with UWM or $50,000, whichever is greater. The company has already sued at least one California mortgage broker for an alleged $2.8 million in damages from at least 560 loans it originated with competitors. The federal lawsuit remains pending.

Fawaz, who spent the last two years on the road meeting with brokers, said nearly every broker he spoke to did not like the ultimatum, calling it "un-American." He said he hasn't spoken to Ishbia directly, although Fawaz said he has nothing against Ishbia personally.

Leaders of the two largest mortgage originators have addressed each other in earnings conference calls with investors, although Ishbia and Rocket Cos. CEO Jay Farner refrained from mentioning them by name. UWM in the third quarter last year overtook Rocket for the first time in total origination volume. Both companies have yet to announce the date of their fourth quarter and full year 2022 earnings results.

As recently as last month, the companies offered competing perks for brokers. In the face of credit score price increases, UWM announced a flat $37.35 fee for brokers for tri-merge credit reports for up to two borrowers. Rocket Pro meanwhile rolled out a Fee Freedom initiative allowing brokers to obtain credit reports at no cost, a move Fawaz credited with drawing "hundreds" of brokers to switch to Rocket Pro TPO.

The rivalry has even extended outside of the mortgage industry, where Rocket founder and Cleveland Cavaliers owner Dan Gilbert abstained from an NBA owners' unanimous vote this week to approve Ishbia and his brother as majority owners of the Suns and Women's National Basketball Association's Phoenix Mercury.

Fawaz declined to speculate on the future of UWM's ultimatum. He emphasized that Rocket welcomes competition, and issued a call on Ishbia to play ball rather than taking the ball and running with it.

"We're going to compete with integrity," he said. "We're going to compete by doing the right thing. And we're going to compete by keeping in mind that brokers matter, clients matter and freedom in this day and age matters more than ever."