“Whole-tail” lenders are lenders who claim to offer both wholesale and retail services, but whose wholesale divisions really exist only to pass leads on to their retail operations. Brokers Against Whole-tail Lending, or BRAWL, is a coalition formed to raise awareness of this tactic.
“In the post-housing-crash world, you had the rise of the non-bank mortgage lenders,” Anthony Casa, founder of BRAWL and president of Garden State Home Loans, told MPA. “These companies kind of became the main players, and the business practice they’ve really mastered is this: if you’re a broker or originator and do one of these loans through one of these companies, they’ve got that customer’s information. Once they get that customer in their servicing line, they’re going to have a retail agent directly contact that person to refinance.”
That leaves the broker out in the cold, Casa said. The work that the broker has done to build a relationship with the customer ends up benefiting the whole-tailer, while the broker – who otherwise might have been able to help the customer with a refi – is cut out of the deal.
“The big picture – the thing we’re trying to bring awareness to – is that originators are doing business with these companies in good faith,” Casa said. “But (whole-tailers) are simply dealing with third-party originators in order to acquire leads for their retail channel.”
And the whole-tail model doesn’t just hurt brokers, Casa said – it can also hurt borrowers.
“It’s extremely damaging,” he said. “In the mortgage business, the only way to grow your business is to develop relationships with your customers and maintain those relationships in the future. This practice steals the customer from the broker without them knowing – and all future business, the multiple transactions they might make. The whole-tail lender is now the primary contact. They’re now doing all those future loans. The customers went with the broker because they shopped around. They trusted that broker. And the lender is preying on the trust the consumer has for that broker. The customer views the lender and the broker as one. The consumer assumes, ‘Hey, I shopped around once. They gave me the best deal, so I must be getting the best deal now.’ But many times it’s a substantially worse deal. So the broker is losing any income they could be getting from the next 10-15 years of that relationship, and the consumer is losing a better deal.”
But both brokers and lenders are becoming more savvy to the practice, Casa said. Thousands of independent brokers have joined BRAWL, and big-name lenders – including Parkside Lending, Angel Oak, and United Wholesale Mortgage – have thrown their support behind the movement. Meanwhile, BRAWL has plans to expand its educational efforts.
“We really need a central point to discuss this, so what we’re doing is developing a lender scorecard for all lenders that are in the wholesale space,” Casa said. “We’re going to have a 12-month scorecard updated every quarter where that lender is going to break down its origination by retail, wholesale, correspondent, etc. We’re going to have those scorecards posted by January for every lender that’s in the wholesale space.”
Originators will also be able to submit verified reviews of lenders as well, Casa said.
Even now, BRAWL is starting to see results. It isn’t just wholesale giants like UWM that have partnered with the movement – even whole-tail lenders have opened a dialogue.
“Some of these lenders are coming to the negotiating table,” Casa said. “In some cases, they’re making changes because they don’t want to lose the broker business. In others, they’re being very straightforward and saying, ‘We’re only in this because we want the relationships the brokers give us.’ … They’re seeing brokers and third-party originators make the decision not to send them business. The reality is, they think this will get an initial spark, but eventually it will run its course and that will be that.”
But Casa said that as long as independent brokers and wholesale lenders
keep calling out whole-tailers, the issue won’t fade from public view.
“From our standpoint, that’s why the scorecards and the reviews are so important. As long as we can continue the engagement and put transparent data out there, this isn’t going away,” he said. “…And (wholesalers) want to see these lenders compete fairly and disclose what they’re doing, or exit the space if they’re going to keep doing what they’re doing. We’ve gotten overwhelming support from the lender community. I don’t think this is going away. I think it’s going to be a continuing story.”
Mortgage brokers call for truth on whole-tail lending
Brokers join to fight 'whole-tail' lending
A network of independent mortgage brokers has been pushing for an end to unethical “whole-tail” lending – and the movement is gaining momentum.