The feud between AIME & its former leader Katie Sweeney is getting quite u-g-l-y & it ain’t got no alibi. In a legal filing this week, Sweeney alleged that UWM is threatening to pull its funding from the broker group if it gives her that big payout Sweeney says she's owed. 

Sweeney, who’s now a leader at Rocket Pro 👀, wants UWM & its CMO Sarah DeCiantis named as defendants, suggesting they were meddling in her contract negotiations. AIME, meanwhile, says Sweeney directed over $900K to herself during her AIME reign 👑 & that money needs to be clawed 🦞back.

Here’s the latest drama:

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Per NMN, Sweeney says AIME leaders told her in ‘20 to negotiate w/ DeCiantis for her salary & bonus to become the trade group's CEO. While AIME accuses Sweeney of arranging her own “hefty” payouts, Sweeney claims she didn’t even have access to the org's accounting software. In ‘22, Sweeney claims an unnamed AIME executive reviewed AIME’s financials & discovered that an employee had used AIME funds to pay for her mortgage "to UWM." The same employee also allegedly abused a company credit card for personal expenses. AIME President Marc Summers allegedly downplayed embezzlement 💠 & put the employee on a payment plan that he never enforced. 

So Sweeney says Summers's got to go, but DeCiantis won’t fire him, the lawsuit claims. Sweeney then sends a list of AIME demands to DeCiantis, including independence from UWM, which DeCiantis also didn't fully agree to, the lawsuit alleges. That, plus “unethical & possibly illegal” conduct at AIME, prompted Sweeney’s eventual resignation, she says. But UWM played hardball & told AIME execs not to pay her what she was contractually owed, the lawsuit claims.

FWIW, more counterclaims from AIME are coming, sources tell The Scoop.

Hey, everybody! The Mortgage Scoop launched about 2 months ago & I’ve been blown away by the support. Thank you 🙏 so much. I wanted to share an important update about the business. We’ll be moving to a paywall starting Wednesday, Nov. 19.

Paid subscribers will get exclusive MWF newsletters packed with scoops, analysis & insights you won’t find anywhere else (plus some bonus content). Founding Members can lock in the price of $240 per year. Monday editions will remain free & open for all subscribers. Hit me up w/ any questions you might have. - James Kleimann

It’s not even been a month since Rocket Companies transformed into a real estate-mortgage Cerberus 🐶. For the time being Rocket is losing money (Mr. Cooper didn’t come cheap), but early indications are they’ll stack sacks of cash 💰 & increase market share fairly quickly. Here’s an early look at how they’re doing it.

On the company’s Q3 earnings call, executives said they’re bullet-proof for every kind of market but will be especially fearsome when rates drop. September was a case study — there was a surge in volume as rates declined. Rocket attributed stronger capture to new workflows & use of AI agents. 

Rocket’s AI tools are engaging w/ prospective clients by collecting documents, chatting w/ them & following up on busy work items that mortgage bankers traditionally had been stuck doing. That pulled LOs away from “actual revenue generating opportunities,” said CFO Brian Brown. “When traditional mortgage companies have inbound leads coming, the only way they can do them is pick up the phone & work longer hours.”

Rocket in September sported a 9-point 🏀 jump in follow ups & a 10% lift in conversions from daily credit pools & refi applications through the use of its pipeline manager agent, which ranks leads in real time, instructs bankers who to call next & drafts custom texts, CEO Varun Krishna said. Within 9 days of acquiring Mr. Cooper, they also moved 40K leads onto Rocket’s origination platform & by Day 12 closed their first Cooper servicing lead. The transition’s been smooth, he said.

Look, Rocket has always been the king of recapture. Adding Mr. Cooper’s immense servicing book to a best-in-class recapture engine should result in loads of servicing income—maybe $500M per quarter?—for many years to come. That’s an important but kinda boring story. 

The real juice 🧃 is the company’s evolving purchase game & its new workflow. Let’s start w/ the top-of-funnel. It’s widening thanks to a pre-qualification “experience & funnel” on every Redfin listing. The number of clients that started pre-qual apps doubled from 250K in July to 500K in September.

Rocket has also deployed a purchase agreement review agent that "cuts processing time by 80%" w/ better accuracy than its legacy process. This is an important thing to watch b/c a lot of Rocket’s purchase struggles have started w/ shaky pre-quals, agents told The Scoop. Some agents just straight up don’t want to work w/ Rocket b/c pre-quals were way off & other process-based issues emerged.

Rocket is throwing legit money at distributed retail LOs & looking to partner them w/ local Redfin agents (115 bps on self gen business & 80 bps on Redfin deals), but they probably won’t do that at major scale nationally. While local relationships will help increase volume, Rocket’s smoother path to purchase glory will be systems & economies of scale that yield cheaper rates for borrowers w/ Redfin agents. Rocket said they’ve already been able to increase Redfin’s attach rate from 27% to 40% & Redfin-sourced retail closings in Q3 accounted for 13% of purchase volume. 

“We only expect that to grow,” Krishna said.

Once VantageScore 4.0 & FICO are both in play for GSE loans, all indications are that lenders will get to choose which score to use on each loan. Basically, it’s the “lender choice” era & things could get pretty exciting in a historically unsexy space in mortgage.

In a new white paper w/ loan-level data on 45M GSE loans originated between ‘13-’23, Milliman analysts explored how giving lenders that flexibility will affect default rates, risk distribution & pricing. Long story short: A lender choice model could have huge secondary market implications & the FHFA/GSEs will likely need to make policy changes in the coming months. Let’s break it down.

Per Milliman, allowing lenders to choose the higher of 2 scores inflates the average reported credit score by ≈ 20 points on average(!). Even though average scores rise, default rates are roughly 30% higher across all scores when "lender choice" is used. That's b/c lenders will choose the higher score, pushing riskier loans into what appears to be a safer credit bucket.

More loans migrate into the upper-end ranges (e.g., 780-850) & fewer remain in the low ranges. The high-score cohorts get diluted w/ riskier borrowers whose “true” credit risk is understated, Milliman says. Since many borrowers will look stronger on paper, they’ll qualify for more advantageous pricing. Milliman cites an AEI estimate that G-fees could fall 10–13%. Unless pricing grids are recalibrated (which could happen by the end of the year, as The Scoop reported Monday), GSEs & investors would earn less relative to the risk they’re assuming.

Milliman said a lender choice model would make historical score-based risk modeling less reliable until the market has recalibrated. Lenders might need tighter overlays or new repurchase triggers once investors demand compensation for the added uncertainty. We still don’t have info on whether the FHFA will come up w/ a new pricing grid for VS4 loans or just mark up the existing grid.

Priscilla & Malloy-less Fannie Mae has laid off “at least 62 employees” (63?) across its DEI, IT & chief operating officer divisions, Bill Pulte said on X.

“We, like any business, must eliminate positions that are not core,” he said. “Recently, I asked a Fannie Mae manager about dozens of employees at Fannie Mae & what they did during the day. The manager could not even tell me what his employees did. He then agreed to eliminate the positions. Wild!”

Readers may recall that The Scoop reported a few weeks ago that Fannie was expected to have more layoffs in the coming months, but not Freddie.

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