ICE knows it has clients over a barrel, one mortgage executive told The Scoop.

“The biggest benefit ICE has is that change is not only hard, it's almost impossible for these lenders,” he said. “Ripping out your LOS is a beast. I think ICE knows that, and that's why they kind of treat people the way they do.”

So when news broke that Pennymac, one of America’s largest lenders, had gone live on Vesta’s cloud-native LOS platform, mortgage executives took notice. Maybe I should look into a different LOS? Maybe it’s not so scary?

But sources from across the mortgage tech & lending landscape said that even though ICE’s customers are frustrated, every single competitor has to overcome huge structural obstacles 🧱 to meaningfully take market share from the industry giant, which controls about 2/3 of the marketplace. More likely, smaller LOSs will consolidate.

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Though the Pennymac deal is splashy (Pennymac also took a large minority stake in Vesta), it doesn’t provide much useful context for the average retail shop that’s thinking about leaving Encompass or giving up on its own proprietary LOS (as is the case w/ Pennymac).

“For a company like Pennymac, I think it's a lot easier for them than an IMB,” said one executive. “They don't really have a lot of retail. It's all correspondent. You don’t have 300 LOs sitting there complaining that you changed the system on them. They're using Encompass to buy loans. It's almost like a storage database.”

Vesta’s tech is top quality — it’s React web architecture, open source, open format API. Vesta only wants to be a core LOS & have bolted different systems on. It’s vendor-friendly, too. But their lack of a big retail client & short history gives some lenders pause.

“It's a longterm viability question,” said an East Coast retail IMB executive. “They built the fundamental infrastructure before AI was a thing. It’s well positioned, but they don’t have any data yet to support that being on Vesta actually has a productivity gain or results in a lower cost per funded loan.”

He said Vesta quotes an integration fee of $150K & a 2 year timeline & could be a good target for other large correspondent shops. But Vesta likely won’t even be seeking another big client until they have all of Pennymac’s channels integrated.

Vesta is hardly the only competitor that sees an opportunity in the LOS space. MeridianLink was recently acquired by CenterBridge Partners for $2B. The company has over 2,000 FIs on a largely API-based platform, but hasn’t made big inroads with IMBs. MeridianLink said it’s picking up lenders in the non-del and del correspondent space of late.

“We've been having record setting sales over the last two years in this market, & that's saying something,” said JP Kelly, SVP of Mortgage.

There’s also Blue Sage, which has some big clients; Fiserv’s PC Lender; Mortgage Cadence; LendingPad; WILQO & of course, Empower.

“Other than Empower & ICE, who has ever reached more than 10% of market share?” said one source. “I think it’s really just that there are a lot of tire-kickers out there. Everybody's trying to take from Encompass, but they’re hard to take from. I think a lot of jumping will happen in the non-Encompass community.”

Added another exec: “Encompass gets a bad rap, but there's a reason they've got 70% market share. It works. Sure, it’s slow but it does the job.”

It wasn’t so long 🕰 ago that Better’s stock was trading below $1 & was under threat of being de-listed 👋 from the NASDAQ. So imagine my surprise on Monday when I got DMs saying, “Dude, did you see that Better’s stock just hit $94?!”

Here’s what’s going on ➡ activist investor Eric Jackson proclaimed that Better was the "Shopify of mortgage" and it took off w/ retail traders. Jackson believes shares will reach $12,000 (not a typo!).

Let’s dive into this one. If there really is a Shopify for mortgage hiding in plain sight, I mean, wow, that’s a game-changer, right? Or is this just an Opendoor-style retail bonanza?

First, let me be clear: Better’s tech is good. Very good. Everyone I’ve spoken to says so. Tinman is an all-in-one tech platform — a POS, CRM, PPE, document reader, LOS & underwriter, all powered by AI. Better worked w/ Palantir on it & has been tweaking it for years. They’ve added an AI, voice-based LO assistant called Betsy.

Here’s the second thing: It’s not Encompass. From a pure tech standpoint, many see that as a good thing. It has a more modern architecture & Better could license/ white label it across the industry. That could be transformative.

But the fact that the entire system is proprietary means another lender would have to give up their entire tech stack & migrate. “How do you do that w/ so many different vendor contracts?” said one solutions firm executive. “Even getting people just to leave Encompass doesn’t happen very often.”

There’s other skepticism, too. “If the tech is so great & so efficient, why are they still losing so much money?” said one IMB executive. “Their cost-per-funded loan should be much lower.”

Better’s overall financial position & CEO Vishal Garg’s history of controversies might spook 👻 other potential partners. Notably, the finance team left en masse in recent months. “The company has like two quarters of cash left,” said one rival. “Something is off in my opinion.”

The buzziest rumor in D.C. over the last two weeks is that Bill Pulte’s time is running out as FHFA Director. Multiple sources told The Scoop this week that he’s run out of political capital after alienating Republican officials such as Treasury Secretary Scott Bessent 🥊 as well as unsuccessful mortgage fraud pursuits of Trump’s political enemies. They described a change as imminent, days or weeks away.

But sources close to the White House say it’s simply not true. There have been no internal discussions about removing Pulte & the President is happy with his work, sources close to the White House said.

One person who’s glad to hear that is Jonathan Haddad. The AIME Chair recently got Pulte to commit to being the guest of honor at AIME Fuse in Nashville next month.

loanDepot filed a motion to dismiss a very unusual class-action lawsuit in Maryland alleging violations of LO comp rules & borrower steering. The suit, filed in July by 5 borrowers, claims the lender ran a years-long scheme to falsify disclosures & push higher-cost loans, allegedly to boost profits 🫰 ahead of its IPO.

The suit accuses loanDepot of pressuring LOs to offer borrowers more expensive loans in exchange for fatter comp. But if LOs were unable to close these deals, they transferred the borrower to internal loan consultants 🧺 (ILCs) who made way less comp. The plaintiffs say that was a sham though & the original LO continued to work on the file. If the LO wrote down that the reason for a transfer was a lower rate, they got no commission, but if they lied they got some comp, the suit says.

loanDepot says the plaintiffs haven’t shown actual harm 🤕. LD argues their loans had historically low rates (2.5%–3.5%) & were not part of the alleged scheme involving ILCs.

Even if the alleged practices occurred—and they did not!— they were not used for the plaintiffs’ loans anyway, LD said. The lender noted that the plaintiffs couldn’t identify a single LO or manager who was involved in the alleged scheme, so like, what are we even doing here?

HousingWire’s Flávia Furlan Nunes & I spoke to a couple industry lawyers & LOs after the case was filed & they said they’ve seen similar alleged practices, but nothing quite like what LD is accused of. There’s a lot of grey w/ the tactics lenders use on pricing exceptions. Nothing prohibits a lender from negotiating different rates for different people & it's common for loans to change hands during a transaction. But if the LO is reducing comp in selective cases, that could be a compliance issue…

I will be in Detroit Sunday-Wednesday for Rocket Pro Experience. If you happen to be there, hit me up. I’ll have full coverage of the event on Monday. I would also appreciate recs to help me find the best Detroit-style pizza…and good cocktails 🍸

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