On Oct. 22, ‘23, I kissed my wife & son goodbye to catch a flight to Kansas City for a trial. Homeowners in Missouri had sued NAR & real estate brokerages for allegedly fixing prices, & I had to go see it for myself. I knew I would eat some good BBQ, but I didn’t think I was going to witness history. 

Candidly, I didn’t expect the plaintiffs in Sitzer Burnett to prevail. Real estate agents have been paid a 5% or 6% commission for literally 80 years. Cheaper, alternative options exist for consumers; they just rarely select them. That’s on them.

To my surprise, the jury verdict came in at $1.8B. Where the DOJ had repeatedly failed in taking down arguably the most powerful lobby in America for cartel shit, ordinary Kansas City Chiefs fans & a folksy lawyer had succeeded. It was a message: Maybe things have always been done this way. That doesn’t matter. Not in a jury trial.

One of the law firms behind the Sitzer-Burnett case—Hagens Berman— has been targeting the remaining heavyweights in housing: Rocket & Zillow. Hagens Berman says the companies use their vertically integrated models to steer consumers to their mortgage arms, even if better deals could be had elsewhere. Basically, ‘We’re giving you, the agent, these leads. If 80% of closed leads don’t go through our lending arm, we’ll punish you.’

Today’s edition of The Mortgage Scoop dives into the merits of the Rocket case & the broader risks of going vertical (this one is only for Mortgage Scoop Insiders). Also on tap today is a Vendor Wars feature on Sharkey Byte.

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Born from an open-source project that got too popular & caught legal heat, Sharkey Byte is now among just a handful of significant software development firms in the Encompass universe. 

Zach Sharkey has the bonafides & an independent streak. He’s arguably the top Encompass SDK developer in the game. After working at Ellie Mae & as an Encompass administrator, Sharkey discovered Larry Bailey’s Basecamp forum. There he would solve the most complicated dev questions that others wouldn’t touch. That morphed into a Github project, where he’d build tools & show other devs/Encompass administrators how to combine 50 into a single plug-in.

He was doing all of this for free, which meant Sharkey was showing up other vendors who were charging for solutions & also depriving ICE of platform support & pass-through revenue. ICE & a few vendors sued. He’s now an official Encompass Partner.

In this edition of Vendor Wars, we give you the inside scoop on the SDK transition, what happened to all the good developers in mortgage tech, Sharkey’s partnership w/ Mortgage Workflow Partners (Disclosure: MWP is an advertising partner) & why his approach differs from incumbents.

Products: Sharkey’s 110-tool Encompass plug-in is the bread-and-butter on the SDK side, w/ many tools his rivals don’t offer. Yes, other vendors have dozens of tools w/ plug-in solutions. “But we’re the only vendor out there that does a single plugin,” Sharkey said. “Typically w/ all the other vendors, let's say you have 20 to 50 plugins in your system. That slows down your Encompass experience a ton.”

Ocean is the other key product. Sharkey Byte hosts its own no-code web solution where users can build a workflow. Create a schedule, build a loan pipeline, & then you just pick your automations that run one after another, & it's all contained within a page. “Even ICE's workflow tool is pretty convoluted & it's not clear a lot of times, like, 'Hey, did this run? Why isn't it running?'” Sharkey said. “Our tool tells you why stuff's not working.”

Marketplace: LenderToolkit and Kensie Mae are the biggest players in the space, but there’s also Awesome Technologies & Ignite. The space has shrunk quite a bit. “You can probably count on both hands the amount of people that are left in the industry that are extremely experienced on the development side.” Sharkey said his competitors do good work & he doesn't talk smack. His tools often coexist alongside competitors.

Sales Model: One key differentiator is his pricing model & lack of tiering. Each product is available through a $1,500 per month subscription, w/ everything included. Small- & mid-sized lenders often can’t afford the higher tiers, contract lengths or pay-per-loan formats, he said. “We also do custom development for free & have an idea board where people can post ideas for new tools or modifications to new tools.” Weekly releases are the norm & transparency is a big part of the value prop; anyone can view the ticket history, response times, & release notes.

On the Encompass SDK to API transition: The transition is “a huge problem right now b/c there’s not enough resources to go around,” Sharkey said. “The mortgage industry, from a technology perspective, it's not very kind to developers, which is kind of why we see this huge gap in technology in general.”

Downsides to Sharkey Byte: Because he’s a solopreneur, Sharkey can’t offer the same level of resources as competitors. He is staffing up this year & has a key partnership with Bailey. Bailey’s team at Mortgage Workflow Partners installs SharkeyByte’s plugins directly for clients, handling ramp-up and integration w/o Sharkey needing to touch the account. For lenders, it’s a rare combo: platform-agnostic workflow consulting paired w/ a vendor that doesn’t force exclusivity.

The TL;DR of the Rocket lawsuit is this: Hagens Berman claims that steering largely occurred via a “Protect & Preserve” agreement w/ Rocket Homes partner agents. Rocket Homes tracked agent performance, particularly the attach rate, which determined who received referrals & how many they received. Hagens-Berman says a variation of the practice continues to this day via Redfin.

Our analysis (w/ exclusive reporting) is available to Mortgage Scoop Insiders.