August 2017   Volume 43, Number 8      


Why More Real Estate Firms Are Now Offering Mortgages

More real estate firms are starting to offer mortgages, as traditional partnerships with lenders have been eroded by compliance strains. Real estate brokerages’ forays into mortgage financing have taken on a number of forms. Real estate franchisor Remax launched Motto Mortgage in 2016 as a franchise brand of mortgage brokerages.

In 2015, a group of Keller Williams executives acquired Fearon Financial, a Dublin, Ohio, nonbank lender that originated mortgages as Primero Home Loans and Smarter Mortgages.

Earlier this year, the brands were phased out and the business was renamed Keller Mortgage in order to leverage a deeper connection with the real estate franchisor. In the beginning of this year, online real estate brokerage Redfin started a mortgage banker.

These affiliated mortgage businesses, whether through joint ventures or outright ownership of a mortgage company, are increasingly replacing the marketing services agreements with lenders that have drawn scrutiny in recent years.

Creating ties between real estate companies and mortgage lenders offers several benefits.

“First and foremost, as you get scale, it is a natural extension and it’s an adjacent growth opportunity in the mortgage business,” said John Campbell, an analyst with investment bank Stephens Inc.

Owning a mortgage company outright or through a joint venture also provides a competitive advantage. Firms are able to turn around transactions faster by creating a seamless process between the two entities, said Campbell. In addition to having greater control over the real estate process, real estate firms also see mortgage lending as a means of adding to their revenue streams.

However, such cross over activity has been going on for decades, said Steve Murray, the president of Real Trends, a real estate industry research and consulting firm. Large homebuilders, such as Lennar and Pult own mortgage companies. Other homebuilders have joint ventures with mortgage lenders, like the partnership between Stearns Lending and KB Home.

Realogy has 6,000 franchised offices in the United States. Its NRT subsidiary, which provides mortgage, title, insurance, escrow, warranty, relocation and concierge services to NRT’s family of companies, owns 780 offices. In the first quarter, NRT and the franchised offices combined did $96 billion in home sales.

To own a mortgage banker outright or through a joint venture requires plenty of capital, Murray pointed out. For instance, Nationstar Mortgage Holdings tried to create its own one-stop shop operation with Xome, a company which had been marketed to buyers searching for homes. The firm allows consumers to pick a real estate agent and obtain a loan along with mortgage-related services, such as title insurance. However, the company is considering selling Xome as its profitability continues to decline.

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In this issue:

The 10 Fastest Growing Cities in the U.S.

3 Million First-time Homebuyers Shut Out of Home Market in Past Decade

America’s Hottest Real Estate Markets: May 2017

Home Prices Are Increasing, But Mortgages Are Still Cheap

Fed Announces Third Rate Hike in 7 Months

Industrial Real Estate Development Reaches 10 Year High

Real Estate Companies Are Moving to the Cloud

Mortgage Applications Down 12 Percent Since 2016

Why More Millennials Are Finally Buying Real Estate

Why More Real Estate Firms Are Now Offering Mortgages


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