Guaranteed rate found another dance partner. And Compass borrows from the playbook of its most visible direct competitor.
Guaranteed Rate, the Chicago-based mortgage lender, and Compass, the New York-based residential real estate brokerage, “have reached a definitive agreement to form PointOrigin, a new mortgage origination company, ”according to a press release on Tuesday.
“OriginPoint will create mortgages for clients of Compass’s real estate brokerage firm, as well as any other brokerage, making the loans available to a wide audience of consumers,” the statement said.
The statement does not say who can run the company or its official launch date. Messages left with the guaranteed rate and the compass on Tuesday were not resent. OriginPoint has an address in Chicago and is actively seeking loan officers, according to OriginPoint website.
For the Guaranteed Rate, a 21-year-old company still run by founder Victor Ciardelli, the partnership makes sense, housing industry watchers said on Tuesday. But, add these observers, it raises eyebrows for Compass.
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“It’s not surprising,” said Bose George, CEO of Keefe, Bruyette and Bois. “The guaranteed rate has a similar joint venture with Analogy. It’s part of their business model.
Guaranteed Rate and Realogy teamed up to form a mortgage origination joint venture when the pair launched Guaranteed Rate Affinity in 2017. After a relatively slow start, Guaranteed Rate Affinity took off in 2020 – its stock profits surged to $ 126 million. of dollars against 15 million dollars a year earlier. , according to public documents from Realogy. Last year, the Guaranteed Rate Affinity company provided $ 13.4 billion in mortgages.
Realogy and Compass are the no. 1 and no. 2 brokerages in residential sales volume nationwide – and bitter rivals. Not only the Realogy brands, including Sotheby’s Realty and Coldwell Banker are battling with Compass, largely in affluent urban markets, but companies are locked in multi-year litigation over trade secret theft and agent recruitment.
In a statement released Tuesday, Realogy did not attack its rival, saying in part, “We remain committed to providing our affiliate agents and franchise owners with innovative and transparent solutions for our clients.”
Another guaranteed rate joint venture partner was more aggressive. Thad Wong, co-CEO of @ Properties – Chicago is no. 1 brokerage by sales volume, lambasted Compass, “For another action that makes them look like a ridiculously traditional brokerage house.”
Compass called itself a tech company, Wong noted, and as recently as May its CEO Robert Reffkin said Compass’s goal was to modernize an archaic industry. But Compass “plugged into the exact same thing as Realogy and the exact same thing we have. They rank themselves.
Compass’s announcement is in line with the company’s earnings announcement in May. On that call – the brokerage’s first as a publicly traded company – Reffkin said: “We have set out on the path of a joint venture by balancing the quality of a result, the speed of a result and the potential size of a result. “
“JV is where we think there will be the most opportunities,” Reffkin added at the time.
The call revealed that Compass lost $ 212 million in the first quarter of 2020 with a revenue model based on earning an average of 15% of an agent’s sales commission. Compass stock traded at $ 13.45 per share on the New York Stock Exchange on Tuesday, representing a market cap of $ 5.3 billion.
The Guaranteed Rate, on the other hand, is among the top 15 unlisted lenders, despite well-heeled institutional investors like black stone Group. The $ 73.9 billion total guaranteed rate fixtures in 2020 represent strong year-over-year growth, but not extraordinary compared to other major mortgage lenders, many of whom had their best year in 2020.
The Guaranteed Rate has made several key acquisitions over the past year to compete with larger lenders, including direct-to-consumer stores. Own and multichannel mortgage firm Stearns Loans, which gives him access to the wholesale channel.
The latest move probably doesn’t change the likelihood that the guaranteed rate will be released anytime soon.
“To some extent, the IPO window for mortgage originators is closed at this time,” said George.
But by having joint ventures with the two best real estate brokerages in the country, the guaranteed rate is well positioned to increase its buying activity in the years to come. (That is, if they can convince agents to keep client financing in the joint venture and not to use their own network of mortgage partners.)
They also found a similar sort of spirit in Compass in terms of how they perceive their position in the market.
Like Compass, Guaranteed Rate is in the world of technology.
“They don’t market themselves as a mortgage company,” noted George, “but a technology company.”
OriginPoint can however be operational from the start.
“There are no issues to fix,” said George. “They are already doing it and are doing it very well with other companies.”
Senior mortgage reporter Georgia Kromrei contributed reporting.