The move came as a big surprise from at least one real estate professional who raised the possibility of conflicts of interest between Redfin’s brokerage and mortgage business. However, the company said it “is building a full compliance function and relying on cutting edge technology to ensure compliance with all laws and regulations.”
The company, which already serves more than 80 major metropolitan areas with its real estate brokerage, said its ultimate goal “is a fully digital process” where clients can expect faster closing and lower fees.
“Redfin Mortgage will put the customer first through a combination of technology and personalized service,” said Glenn Kelman, CEO of Redfin, in a press release. “This approach to mortgage is the same one that has enabled us to serve over 75,000 clients who buy and sell homes. We will meet with customers through digital channels to reduce customer acquisition costs. We’ll hire our own Mortgage Consultants with incentives that reward service, not just sales, so clients get advice they can trust. We will track every aspect of the closing in a single system used by mortgage advisors, realtors, title experts and the client so everyone works together on a close on time.
The stand-alone mortgage business will be managed from a new Dallas office headed by Jason Bateman, former executive vice president of mortgage operations at BBVA Compass. The company plans to begin issuing loans in the first half of this year, initially serving clients in the Austin, Dallas, Houston and San Antonio markets.
The software engineers supporting the new company will be based in Seattle.
Seattle area real estate professional Jeff Reynolds has been a broker with Windermere Real Estate for 14 years. He was taken by surprise when he learned what the competition was up to.
“This is going to turn lenders upside down,” said Reynolds, who also runs Urban Condo Spaces, a Seattle real estate team and blog. “If you look on the Redfin site, you can see the lenders they prefer and you can see how much business they are driving to these lenders. You will see guys who have been rated 600 times. And those reviews obviously correlate with direct referrals from people buying properties with Redfin. So in theory, business like this would disappear if Redfin started dealing with the mortgage broker side. “
But Redfin said in its press release that its agents will continue to partner “with lenders of all stripes, encouraging clients to work with the lender who offers the best combination of service and rate.” The company said “there will be no incentive for Redfin real estate agents to recommend a Redfin loan.”
In a follow-up email responding to GeekWire’s questions, the company provided the following responses:
On the precedents for this type of business combination: In fact, Re / Max recently launched a new mortgage franchise, Motto Mortgage, which Re / Max real estate brokers can use to create affiliated mortgage brokerages. Mortgage currency is a little different, as it is aimed at mortgage brokerages, not direct lenders, which means they tie borrowers to lending options. Redfin Mortgage, on the other hand, is a direct lender, which means we fund the loans ourselves. Therefore, ours represents a much greater investment and effort.
On potential regulatory challenges: The mortgage industry is highly regulated by federal and state agencies. Therefore, we develop a full compliance function and take advantage of cutting edge technology to ensure compliance with all laws and regulations.
In addition, there will be no conflict of interest between Redfin’s brokerage activities and mortgage transactions. According to the Federal Real Estate Settlement Procedures Act (RESPA), real estate agents, lenders, and settlement agents are prohibited from paying themselves for business. We have no intention of requiring clients to use our services and we do not compensate anyone for referrals to other divisions. Additionally, Redfin’s business model is to give a commission to our agents (and now lenders) based on customer satisfaction and any incentives beyond that that would go against our company values.
Reynolds said he can understand how a business could use process streamlining as a selling point, but said he thought most customers would be a little surprised.
“This is exactly the fear the government has always had of involving real estate agents in banking, or banks getting involved in real estate,” Reynolds said. “It’s really something that’s been avoided because it’s just not independent. To me, at least, it doesn’t look good to me. It might be a conflict of interest.
“Most clients feel like there would be some separation there because you are talking about the two biggest decisions a buyer makes before committing to a property: choosing a broker and choosing a lender. . These have always been systematically separated from each other.
Bateman, the head of the new Dallas office, said in the press release that the buyer “wins” when the agent, the title professional and the lender work together.
“Lenders should spend their time determining which loan is right for a customer, not looking for new customers,” Bateman said. “If an assessment is low or an inspection reveals a problem, everyone should be notified at the same time, plus phone calls and emails hours after the fact. Automating tasks that were once done manually should not only reduce costs, but also reduce the possibility of errors that create loan risk. Our vision is what I had always imagined the home loan should be.
Since Redfin’s mortgage service depends on integration with its brokerage operation, the company does not initially plan to support refinances or loans to consumers who buy a home without hiring a Redfin agent, added. the society.
“It’s going to be a big shake-up in the market, because it’s just a lot of volume that they’re currently referring to lenders,” said Reynolds, referring specifically to independent lenders in Seattle, and predicting the business will move to the next level. – beyond Texas.
He said he often refers two or three lenders to his clients because he doesn’t want it to look like he’s favoring a person.
“I act like a better trustee if I give them options,” Reynolds said. “To me that is one of the main reasons in itself why it seems a little weird to me.”