The average mortgage originator is getting absolutely smoked by a few hungry master servicers when it comes to recapture. 

In today’s edition of The Mortgage Scoop, we dive into the economics of recapture. Plus, we’ve got a scoop re EPOs at PrimeLending, analysis of Rocket’s very busy week, a look at whether Zillow mortgage leads are “a thing of value.” And we share color from the Thoma Bravo dealmakers who bought Ellie Mae for $3.7B & sold it to ICE for $11B(!) a year later.

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Roughly 68% of repeat borrower opportunities are being lost among the top 500 IMBs, according to RETR. That’s wild! And it’s trending in the wrong direction (from 64% in ‘24).

That 68% figure “equates to more than $66B in lost borrower retention volume in just six months,” James Hooper wrote. “Retention begins the day after closing, not at payoff. The lenders outperforming in recapture share three consistent traits:
1) Proactive, data-driven borrower engagement
2) Continuous monitoring of equity and rate incentive triggers
3)Structured retention playbooks for originators.”

I asked around to see how it’s playing out in real-world scenarios.

“My gut feeling is the game is changing for IMBs to retain their servicing b/c the big master servicers are going to be able to do it for a fraction of the cost,” one IMB CEO told me last week. “I would not want to be in a place where I'm telling my loan originators that I'm going to send the servicing back to them b/c you cannot do that economically. You will never recapture b/c some Joe Blow field loan originator making 100 bps has no chance of being in the money before the servicers or the call center guys get there.”

This CEO noted his firm has been notching IRRLs lately. He said they recently did a $400K 30-year-fixed VA IRRL at 5.375%, which came in at 140 bps of margin. “If you wanna be able to do those loans, you have to be able to do them for 150 to 200 bps. Full-in, that loan will bring in $8,000 gross. It’s 175 bps, so how are you going to do that when the branch margin at most companies is 200 bps?”

Stay tuned for our Wednesday edition. We have a fantastic interview w/ Consigliera’s Courtney Thompson on all the latest happenings in servicing.

Mortgage rates are in the 5s for a lot of prospective borrowers, which means 1) Lots more refis; 2) Lots more… EPOs? ☹️

To that end, sources said PrimeLending recently informed managers that LO contract language is being updated across the board. The big change is that LOs will now be charged if there is an EPO, one LO told The Scoop.

“This change comes after we have seen noticeable changes in our rate sheets (worse rates),” the LO said. “It seems like LOs producing at a high level are being given a lot of leeway to price better, but not everyone.” The LO said he is pricing loans w/ a 75 bps to 125 bps discount v. target pricing. “My gut feel is that the huge pricing exceptions won't be allowed indefinitely. I suspect some higher ups will review stuff after Q1 push to control pricing more strictly.”

The LO said his local branch would walk if PEs don’t continue or the rate sheet doesn't improve...

A second LO at PrimeLending confirmed that rates were elevated & noted that the parent company disclosed consecutive quarters of financial losses stemming from the mortgage lending operation. The mortgage operation lost $7.2M in Q3 ‘25 & $5.2M in Q4…

An email to a PrimeLending spokesperson went unreturned on Monday…

Zillow’s response to the RESPA case Taylor v. Zillow is well-written and well-argued, writes Rob Hahn. But there are some weak points, notably the mortgage steering claims. 

Hahn writes:

The real theory of the plaintiffs is something like this:

He notes that the evidence includes evidence from 12 confidential witnesses describing a coercive quota system.

Zillow reps allegedly flew to agent offices in person to deliver demands they wouldn’t put in writing: not the publicly stated 10% pre-approval target, but 50% close rates with ZHL. Agents who didn’t comply were told their leads would be redirected. Agents who recommended competing lenders were “chastised” and “trained on how to not recommend other lenders.” Agents were terminated for not sending enough leads to ZHL…

…Zillow does cite a case, CFPB v. Borders & Borders, to say that leads are not a “thing of value” under RESPA. I don’t know; I don’t care to read that case too closely, but it is as if Zillow absolutely refuses to even acknowledge that Zillow leads to agents are a thing of value. And if mortgage referrals—even to get a pre-approval letter—were not a thing of value to Zillow Home Loans, then why have quotas for it?

Rocket, which is now allied w/ Compass, was hit w/ a similar RESPA steering lawsuit in January...

Speaking of Rocket, the Detroit giant has been the talk of the town. The Compass MSA deal captured all the headlines, but Rocket also released earnings & held its broker event Ignite on Thursday.

On the earnings: Rocket generated $2.44B in total adjusted revenue & $316M in adjusted net income on $47.3B in origination volume and 2.82% GOS. Its purchase market share expanded to 5.5% from 3.8% the year prior & Rocket launched fully digital purchase pre-approvals. The company also said its integration of Redfin & Mr. Cooper is way ahead of schedule.

On Ignite: The broadcast generated mixed reviews among brokers. Audio issues in the beginning turned some brokers off. And not everyone liked the quasi-sporting-event format w/ color commentary & sideline reporting. It was awkward & stiff at times, they said. The notable announcements also didn’t come until very late into the broadcast.

But more than a few brokers were excited at the prospect of stacking 80 bps of purchase discounts w/ Compass agents. Others were intrigued about having a free LOS (Jupiter) that could be used w/ all lenders & in general said Ignite proves that the company is investing heavily in wholesale. 

Have you seen the YouTube video of Thoma Bravo bigwigs talking their time owning Ellie Mae? Thoma Bravo famously bought Ellie for $3.7B in ‘19 & then sold it to Intercontinental Exchange for $11B a year later. It’s a really entertaining, inside-baseball recounting of the deal & ICE’s vision for digitizing mortgage. 

Thoma Bravo’s Holden Spaht & Brian Jaffee shared color about negotiating w/ Jeff Sprecher & Ben Jackson (“You guys are going to make a lot of money on this deal”). They also walked through how they underwrote the volume-driven pricing model, the $100M margin opportunity identified in diligence & operational/pricing changes they made. Worth a watch!

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