The day may be fast approaching when making a cash offer is a routine option for homebuyers, as thousands of independent mortgage brokers are gaining access to a cash offer program through one of the nation’s largest wholesale mortgage lenders, Homepoint.
The nation’s third largest wholesale mortgage lender, Ann Arbor-Michigan based Homepoint funds mortgages in all 50 states. The Homepoint Cash Compete program is currently available in six states — California, Colorado, Minnesota, Oregon, Texas and Washington. But the company that powers it — Denver-based Accept.inc — says it’s planning to rapidly scale up to have a presence in every state where iBuyers are doing business.
Adam Pollack
“Arizona is on our hit list, and North Carolina, South Carolina — anywhere you see iBuyers is a place where we want to have a complementary product,” Accept.inc co-founder and CEO Adam Pollack told Inman. “So basically take Opendoor’s roadmap, and that’s going to be our priority in terms of where we get licensed.”
Guild Mortgage just rolled out a cash offer program in 11 states, and Lower has partnered with Orchard to offer Power Buyer services.
But Pollack and Homepoint President of Originations Phil Shoemaker believe their partnership marks the first time a wholesale mortgage lender has made a cash offer product available to homebuyers.
That’s a big deal for real estate agents because if they have a favorite mortgage broker they prefer to work with, that broker can help their clients make cash offers with a short-term loan from Accept.inc, and obtain permanent funding through Homepoint in markets where the Homepoint Cash Compete program is available.
Shoemaker told Inman that Homepoint started exploring ways to add a cash offer product to its offerings last year. He said one reason Homepoint partnered with Accept.inc was that, unlike some vertically integrated Power Buyers that want homebuyers to use their in-house agents, Accept.inc works with any real estate agent.
Phil Shoemaker
“The mortgage industry is very much about relationships, and agents, to a large extent, are kind of the tip of that spear,” Shoemaker said. “They’re the ones that try everything, the ones that have the relationships with the borrowers, the ones that have the relationships with the [mortgage] originators. And when you try to disrupt that, typically these programs don’t work.
“What we tried to do with Cash Compete, and I think we’ve been successful doing, is to really respect that relationship and put something out there that continues to allow the borrower to have a choice around the agent that they want to use, either on the sell or buy side, as well as to provide solution for this highly competitive market, where you see cash winning deals at a disproportionate rate.”
From the homebuyer’s standpoint, Homepoint claims working with a wholesale mortgage broker can save consumers an average of $8,000 compared to loans provided by banks and direct-to-consumer lenders, after factoring in lower wholesale mortgage rates, fees and life-of-the-loan expenses.
Accept.inc, charges a 1 percent upfront fee for the short-term loan that homebuyers use to make a cash offer, plus the same interest rate that they qualify for on their permanent financing. Accept says its buyers save an of average $13,000 in multi-offer situations and that even when there’s no competition, cash discounts can help buyers save 3 percent to 4 percent off the list price.
Founded in 2016, Accept.inc last summer announced a $90 million debt and equity funding round led by venture capital firm Signal Fire. Since then, the company has been piloting its cash offer program with a retail mortgage lender, Celebrity Home Loans.
According to the Nationwide Mortgage Licensing System and Registry, Celebrity Home Loans sponsors 764 mortgage loan originators working out of 124 branches in 40 states, under trade names including Alegre Home Loans, Champion Mortgage Group, DayOne Mortgage Group, Direct Mortgage Funding; ECLICK Lending, Elite Mortgage Solutions, Heritage Home Loans, JB Mortgage Group, Neo Home Loans, Pacific Northwest Lending, Stonemark Mortgage, Veteran’s Mortgage Source and Wells Funding Group.
Pollack said the partnership with Celebrity Home Loans has helped Accept.inc facilitate $1 billion in transactions to date, and that the company is looking forward to partnering with additional retail mortgage lenders.
“Obviously Homepoint is a huge lender, so I’m not really as focused on the wholesale world, but I am very interested in expanding our retail lender product to additional lenders,” Pollack said.
Accept.inc’s proprietary technology platform for lenders and loan originators “scales a little more like software,” allowing for rapid growth Pollack said.
Although “we’re laser focused on making sure that we serve our clients and our existing lenders really, really well” before launching with other lenders, “we are actively soliciting lenders and getting the information that we need to ultimately onboard them,” he said. “The vision for Accept has always been, ‘Microsoft put a PC on every desk, and Accept, I think, is going to put a cash offer on every home.”
Pollack called the partnership with Homepoint “another brave step, if you will, towards getting closer to that vision by allowing agents to work with other originators, whether loan officers at their favorite retail lender or mortgage brokers with the likes of Homepoint, to access these products that their buyers want in order to close on their dream home.”
A subsidiary of Home Point Capital Inc., Homepoint originated $96.2 billion in mortgage loans last year, with close to three-quarters of that production (72 percent) generated by the wholesale channel and its ties to more than 8,000 broker partners, according to the company’s most recent annual report to investors.
With rising interest rates putting the brakes on many lenders’ refinancing business, getting into the cash offer game could be crucial in growing Homepoint’s purchase loan originations. Although Homepoint’s purchase loan business grew by 56 percent in 2021, to $29.9 billion, refis still accounted for more than two-thirds (69 percent) of 2021 loan production.
Shoemaker said the transition out of the pandemic refi boom of 2020 was the impetus for Homepoint to launch the Cash Compete program.
“It became very apparent that one of the things that the market was struggling with as a whole was how to deal with the competitive nature of the purchase market,” he said. “We saw ample evidence across the country where highly qualified buyers were really struggling to win deals.”
Loan pricing has been available to Homepoint mortgage brokers for about a week, he said, and “we actually just go our first [loan] in the door on Friday.”
Shoemaker said Homepoint sees the Cash Compete program as not only a great way to bring in more business from homebuyers, but also to sign up more mortgage brokers as partners, as real estate agents bring in clients who’d like to make cash offers.
Homepoint, which grew originations through its wholesale channel by 84 percent in 2021 to $69.5 billion, is “approving a very large number of [new] brokers every month,” Shoemaker said. “So we’re continuing to grow that partner base, and we already cover a large percentage of markets.”
So if a real estate agent has a preferred mortgage broker, “there’s a pretty good chance that they’re already set up” with Homepoint, he said.
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