Is You Taking Notes On a Criminal Conspiracy? ✏️
A class-action seeking lawsuit in Tennessee alleges that lenders used OB’s pricing tools to violate the Sherman Act
Mortgage people, are you sitting down? I have some bad news. The cutthroat industry you’re a part of is not actually as competitive as you’ve been led to believe. Turns out, many of you have been conspiring to fix prices for consumers through Optimal Blue. At least that’s what an explosive 💣 new lawsuit alleges.
Mendez v. Optimal Blue, filed in Tennessee court this month, accuses the country’s top mortgage lenders (Rocket, UWM, Wells Fargo, etc.) & the industry’s dominant PPE of colluding to keep rates & fees artificially high nationwide, in violation of the Sherman Act. Plaintiffs allege that the lenders & OB are acting like a “cartel,” in a suit that rhymes closely w/ similar actions brought against multifamily software giant RealPage and some of the country’s largest apartment landlords.
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What's On Tap - Oct. 8
OB (Cont.)
Beginning around ‘19, lenders began uploading granular, nonpublic loan-level data—including margins, loan officer compensation, borrower credit profiles, LLPAs, and concessions—into OB’s system, per the suit. In exchange, they got real-time intel on competitors’ rates & margins, intel that allowed them to align prices & eliminate competition.
“When Loan Originators discover they are pricing below rivals, they raise margins without risking market share loss,” the suit claims. “Because lenders monitor competitors’ prices in near real-time, downward pricing pressure evaporates.”
Rate spreads for lenders using OB were 49.2% higher than non-users since ‘20, the suit alleges. Even after controlling for “macro factors,” rate spreads among OB users rose 9.6 bps above pre-2020 levels, plaintiffs claim.
A rep for OB denied the allegations, & said the firm was “confident that we can demonstrate how Optimal Blue’s products actually foster competition in the mortgage industry.”
OB declined to comment further, but I’d bet that in its legal response, the company will argue that it provides standardized software & aggregated analytics to help lenders comply w/ disclosure laws & compete more efficiently. Lenders input their own pricing overlays & margins individually, & the software merely automates adjustments like Treasury yields, MBS spreads, LLPAs. It's not coordinated, per se. One might also argue that Fed policy and inflation have been the primary drivers of rate spreads, rather than software.
This one’s worth tracking 👣 closely.
Share your thoughts w/ me at [email protected].
Equifax Ups the Ante 🫵
Speaking of alleged cartels…A few days after FICO announced its plans to cut the bureaus out & go directly to resellers, Equifax announced a free offer & big pricing discounts. Through ‘26 Equifax is offering free VantageScore 4.0 credit scores to its mortgage customers who purchase FICO scores. VS4 mortgage credit scores will also be priced at $4.50 through ‘27, which it says is 50% cheaper than the cost of a FICO score.They’re also going to provide The Work Number for free. Additional data or services needed by customers to calculate a FICO score will be charged separately, so the math is still a bit fuzzy IMO.
“The conversion of FICO’s high priced scores to the higher performing VantageScore is also good for Equifax and opens up over a $100M profit opportunity,” Equifax CEO Mark Begor said. “We expect conversions from FICO to VantageScore to accelerate with our competitive offering.”
Equifax says the free VantageScore 4.0 scores will show lenders the value of VS4's alternative data, which it says makes it possible to score 33M more U.S. adults. But in a new study, center-right think tank American Enterprise Institute said the gains over FICO Classic are overstated & based on a flawed methodology. (VantageScore in turn said, “No, you’re wrong!!!”)
What’s All That Movement? 🏃
The Scoop broke the news yesterday that Movement COO Jason Stenger had resigned to join a new shop in a sales role. Interestingly, his better half Lisa also works at Movement in compliance. Will she stay?
As detailed yesterday, Movement has lost a good number of solid producers to the usual suspects in recent years. The problem, said one former Movement worker, is who's leaving. A lot of their biggest producers w/ the best pricing have stayed, but Movement has lost a good chunk of $10M to $30M producers who make more money for the company.
That will impact the top producers sooner than later, the source said. “You're living off the fact that [a less productive Movement LO] is selling a 400 margin gov’t loan, right, and you're selling 200. If you keep losing them, at some point they're going to say, ‘Yeah, you aren’t getting PE’ & that's when you are going to have a problem.”
NEXA’s Real Estate Brokerage 🦅
The ever-busy Mike Kortas can add another feather 🪶 to his cap: This renaissance man opened a real estate brokerage in his home state of Arizona to go along w/ the wholesale lender & jet business. NEXA Realty appears to be structured like eXp Realty, with 100% commissions & downlines for agents.
On the mortgage side, sources told The Scoop that NEXA might just be getting their Full Eagle from HUD pretty soon…
CCM is Future-Proofing 😎
In an excellent interview w/ my friend Flávia Furlan Nunes, Ron Leonhardt shares how CCM is using the asset management arm to grow organically. He said they're going to expand product offerings w/ resi transition loans, bridge, fix-and-flip & even get into resi multifamily. "We’re going to do builder financing, resi and multifamily, & we’ll be offering the multifamily for up to 30 units. Those will be products that we will be offering by year end that will fit into that asset management bucket."
Leonhardt said the servicing portfolio will reach $200B by year's end & they've acquired $72B in MSRs YTD…
It may sound a bit like Freedom, NewRez or PennyMac, but CCM won’t be jumping into correspondent. Leonhardt told Nunes that they’re not expanding the asset management business beyond CCM-originated loans, but he wouldn’t rule it out in the future.
Quickies
Troubled CRM vendor Aidium, which was once known as Daily AI, has rebranded yet again. The Scoop broke the news a week ago that Aidium was plagued by financial & managerial issues & is now under new management from backer PeakSpan Capital. New CEO Josh Glantz said Aidium is now called Lendware & just received a capital infusion. They appear to be targeting mortgage brokers.
Pennymac is not buying digital lender Better, a source close to the correspondent giant told The Scoop. In fact, Pennymac is not gearing up to buy anybody, the source said. It’s business as usual at the firm, which has made some big C-Suite changes, is growing organically in the broker channel & continuing to buy an insane amount of loans via correspondent.
Logan Mohtashami (great guy) is known for his incredible hair & his silk shirts. Here’s a scoop: He buys them in bulk on Amazon. Me? I’m more of a Dan Flashes guy myself. Speaking of HW, Rene Rodriguez brokered a meeting between Clayton Collins & Eddy Perez. The beef was squashed at NEXAFEST, I’m told.
The Senate confirmed Jonathan McKernan as the undersecretary for domestic finance at the Treasury Department. Once the nominee for the CFPB, McKernan is expected to be heavily involved in the effort to take Fannie & Freddie “public.”
Mortgage rates might not go down much even if the Fed makes more cuts, Minneapolis Fed Bank President Neel Kashkari said Tuesday. “I’m not convinced that a few cuts to interest rates are going to translate into much lower mortgage costs because so much investment capital is going outside of the housing sector,” he said. Data centers are offering better returns to investors, he added.
ARMchair Critics
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