Exodus from wholesale unlikely in the wake of Guaranteed Rate's exit

Guaranteed Rate

Guaranteed Rate's exit of the wholesale channel is an outlier, with few, if any, companies likely to follow along, said president of broker advocacy for the Association of Independent Mortgage Experts.

The mortgage brokers that worked with Stearns Wholesale "saw the writing on the wall" after Guaranteed Rate's purchase of Stearns Lending took place one year ago, Brendan McKay added.

"Guaranteed Rate is a retail focused company and the expectation was that they weren't doing the deal to get into wholesale," McKay said. "I don't expect more lenders to leave wholesale; if anything, I expect more lenders to enter the wholesale channel as the broker percentage of the market continues to grow."

With rising interest rates, the broker business is seeing interest from retail mortgage originators who are no longer encumbered by a large refinance pipeline of loans in progress, tying them to their employer.

As a result, the lenders that are likely to exit wholesale now are those like Guaranteed Rate that don't have much of a presence in the channel, McKay continued.

Chicago-based Guaranteed Rate confirmed the news, but no other details were made available.

Back in 2005, Guaranteed Rate worked with approximately 100 mortgage brokers, but, like many other lenders, ultimately left the wholesale channel.

Stearns was once one of the largest wholesalers in the mortgage business. But in recent years, Stearns' management put an emphasis on developing other origination lines, such as the retail channel as well as joint ventures with both smaller companies in the mortgage industry and those outside of it.

That's what attracted Guaranteed Rate to Stearns, whose prior owner, Blackstone, purchased the latter company out of bankruptcy in October 2019. The joint venture business was considered to be one of the drivers for the transaction. In 2017, Guaranteed Rate itself had formed a joint venture with Realogy Holdings Corp. to create Guaranteed Rate Affinity, which markets its services to Realogy's real estate brokerage and relocation subsidiaries.

Brokers that were doing business with Guaranteed Rate shouldn't have any problems finding another outlet for their production, AIME's McKay said.

But he did warn them to keep a vigilant eye on the customers that had closed loans with Guaranteed Rate, fully expecting the lender to solicit those borrowers for when they needed their next mortgage.