Pontiac-based United Shore could steal No. 1 ranking from Quicken Loans

One of Michigan's fastest-growing companies, Pontiac-based United Shore Financial Services is on a hiring spree adding 200 employees a month and increasingly competing head-to-head against industry giant Quicken Loans in a key segment of the mortgage-lending market.

CEO Mat Ishbia says that if his company's growth continues, United Shore could soon snag bragging rights to being the nation's top mortgage firm.

But his goal will require beating a formidable incumbent: Detroit-based Quicken Loans. And Quicken, better-known on the national stage, has been working to thwart Ishbia's dream, expanding fast in a segment of the business that involves mortgage brokers and has been United Shore's sole focus in recent years.

United Shore, which employs 5,000 people, is still largely unknown to the general public outside Michigan, but has become a major force in the mortgage world since last decade's housing crash. It and Quicken Loans are helping to make metro Detroit a national leader in another industry beyond the automotive sector.

Unlike banks and many online lenders, United Shore does not widely advertise because its customers are mortgage brokers — not homebuyers. It borrows money to underwrite the loans that these brokers make, which is called wholesale mortgage lending. That is the only type of business it does, which is unusual for such a high-volume national lender.

By comparison, Quicken Loans does some wholesale lending but makes the majority of its loans directly to consumers, which is known as retail lending. Its Rocket Mortgage brand appears in many TV commercials and online ads, and the firm sponsors high-profile sporting events, such as the Rocket Mortgage Classic on the PGA tour.

Direct-to-consumer loans — Quicken's forte — also have higher profit margins than the type of business United Shore underwrites.

"We make a lot less per deal," Ishbia said. “That’s another reason why (lenders) don’t just do wholesale. They think they can’t make much money in wholesale.”

Even so, United Shore is gaining on Quicken in the race for total volume of closed loans.

A Quicken Loans representative issued a statement regarding United Shore's aims to unseat it in the rankings.

“As the nation’s largest lender, Quicken Loans' sole focus is on delivering a world-class client experience," said Aaron Emerson, Quicken's senior vice president of communications. "This has led to the best client service in the industry, resulting in a record 16 J.D. Power awards in the last 10 years.”

Coach Izzo's cauldron

Ishbia, 40, is a Birmingham Seaholm High School graduate who played basketball at Michigan State University and whose father, Jeffrey Ishbia, founded United Shore in the mid-1980s. Mat Ishbia laid out an ambitious vision for the company in his recently released book and in a Free Press interview this month.

The book, "Running the Corporate Offense: Lessons in Effective Leadership from the Bench to the Board Room," is part autobiography, part business advice and part insider's account of what it is like having Tom Izzo as a coach. (One not-fun fact: Izzo sometimes schedules practices at 5:15 a.m.)

"We have our sights set on becoming the No. 1 overall mortgage company in America — counting both wholesale and retail lenders," Mat Ishbia wrote. "All those giant banks that you and your family and friends have savings accounts at, all those mega online lenders you see commercials for — we want to be bigger than all of them."

Such grand declarations might ordinarily be dismissed as whimsical, over-caffeinated talk.

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Yet after more than doubling its annual revenue in 2019 to over $3 billion and seeing its total mortgage origination volume surge 160% year-over-year to $107 billion, United Shore appears to have a chance of someday catching Quicken if brokers' share of the mortgage market continues to grow.

Quicken reported closing $145 billion in loans last year, according to the Detroit News, setting its own company record.

"I think this year and next year, we’ll become the No. 1," Ishbia said in the interview. "Quicken Loans is a great company. They’ve done a lot of great things. They are very successful. ... But without a question, I’m very competitive. I won a national championship at Michigan State. We want to be the best."

A tough act to follow

Quicken Loans, an all-online lender, has been ranked No. 1 since late 2017 for direct-to-consumer retail lending. The company was started by Detroit businessman Dan Gilbert, 58, also majority owner of the Cleveland Cavaliers and a Michigan State alumnus.

Although some industry observers still put Quicken behind Wells Fargo in a broader category that counts banks' purchase of closed loans that other lenders made, few dispute Quicken's marketing claim as the mortgage leader. (Wells Fargo declined to comment.)

Because Quicken's traditional strength is in mortgage refinancings, it benefited from the surge in refinancing activity last year that kicked off in the spring when mortgage rates started falling. Quicken does not disclose what proportion of its total business refinancings represent.

Expanding in wholesale

The Detroit lender also does mortgages for purchasing homes. Those loans, as well as refinancings, are considered direct-to-consumer business, or retail lending.

Increasingly, Quicken Loans is getting into United Shore's business — wholesale lending — by working with independent mortgage brokers to underwrite loans.

Quicken's expansion in wholesale lending allows it to do more overall business because more consumers are using mortgage brokers.

Nationwide, brokers accounted for roughly one-third of the mortgage market just before the housing collapse. Their share fell to 7% by 2011, according to Mortgage News Daily, and began to rebound. Brokers' share of conventional, non-jumbo mortgages was back up to 16% last year, according to housing data firm CoreLogic.

“The broker business is absolutely exploding," Bob Walters, Quicken's president and chief operating officer, said last year in a company video viewed by the Free Press. "It is one of the fastest-growing areas in the mortgage space. So that is enticing."

Mortgage brokers say they often obtain better deals for clients than consumers can on their own because they shop for rates with different lenders. Brokers typically obtain clients through referrals from real estate agents or websites such as Zillow or LendingTree.

Overlapping lanes

Since 2015, United Shore has been ranked as the nation's No. 1 wholesale lender by industry observed Inside Mortgage Finance. However, it still trails Quicken in total volume of closed loans: $107 billion versus $145 billion in 2019, according to the companies' self-reported figures.

Quicken's expansion into wholesale lending made the two companies direct competitors. Previously, Quicken and United Shore more or less stayed within the lanes of non-overlapping business segments.

In the company video, Quicken's Walters said the Detroit firm's wholesale-lending division grew its business from $7 billion in 2017 to $12 billion in 2018 and was on pace to hit $45 billion for 2019. Quicken is now "the second largest wholesale lender out there," he said.

Walters didn't name United Shore in the video.

He did note how Quicken Loans began as a mortgage broker in 1985.

“So that’s in our DNA; that’s in our blood," he said. Back then, the business was known as Rock Mortgage.

A Quicken Loans spokesman told the Free Press this week that the firm disagrees with the prevailing industry definition of wholesale lending and considers all of its broker division's loans as retail loans. The division is called Quicken Loans Mortgage Services or QLMS.

"To Bob’s point, if you were to compare QLMS to the rest of the industry, using the inaccurate definition of wholesale lender, it would make QLMS the second largest in the space," Emerson said. "The fact remains Quicken Loans is proud to support its broker partners by underwriting, processing and closing these mortgages, which according to the government’s own definition, (are) indeed considered a retail mortgage origination.”

Changing the mortgage formula

United Shore had just 13 employees in 2003. It entered a hyper-growth phase after large banks such as Wells Fargo, Bank of America, Citibank and JP Morgan Chase exited the wholesale mortgage-lending business in the wake of the housing crash.

More recently, United Shore attracted brokers to its business by offering low rates on mortgages that it sometimes makes little or no profit from, and through its technology platform, called Blink, which simplifies and automates some of the mortgage application process, according to interviews with more than a half-dozen brokers.

The company also does business under the name United Wholesale Mortgage or UWM. It shut down its small direct-to-consumer mortgage division in 2014.

“As a mortgage broker, we get a lot of calls from bankers and lenders trying to earn our business and their sales pitch is like, ‘yeah, we’re setting up systems which are going to be like UWM’s,' ” said Anthony Bird, owner of Riverbank Finance in Grand Rapids.

Other brokers said that because United Shore only does wholesale lending, they don't feel like they are doing business with a competitor in the way that they might with a bank that offers both wholesale and direct-to-consumer loans.

"They know that if our business grows, their business is going to grow,” said Casey Finn, a Troy-based mortgage broker.

Gary Brownell, a senior managing director at Ann Arbor-based Home Point Financial, another wholesale mortgage-lending firm, said that United Shore's technology platform brought a real innovation to the industry. The platform debuted in 2015.

“From a perspective as a competitor looking at them, I think they’ve done a really good job of making technology investments at times when it maybe wasn’t convenient for them," he said. "And that is something, particularly over the last 10 years, that’s really been a struggle for the wholesale side. (It) hasn't had the level of investment that the other channels have had on the technology side.”

No subprime to see here

United Shore had a phenomenal year in 2019, breaking the all-time record for wholesale lending in one year, set by now-defunct Countrywide Financial in 2005 at just over $103 billion, according to Ishbia.

It got national attention for its company holiday party that featured a giveaway of 30 Caribbean cruises and free two-year leases on 13 Cadillacs. To accommodate its growth, United Shore is preparing to expand its Pontiac headquarters this year into a second building.

Countrywide was an industry juggernaut that did multiple types of mortgages and saw explosive growth until its collapse amid the subprime mortgage crisis.

Ishbia said his company isn't on that path.

United Shore did not loosen lending standards to achieve growth, he said, or do any risky subprime loans. About 98% of the company's mortgages are sold to government-backed enterprises such as Fannie Mae or Freddie Mac, which set criteria for borrowers. Its other mortgages are jumbo loans for higher-value homes, he said.

"I’m not going to sacrifice the future for today," Ishbia said.

Contact JC Reindl at 313-222-6631 or jcreindl@freepress.com. Follow him on Twitter @jcreindl. Read more on business and sign up for our business newsletter.