Jason Mitchell on lawsuits targeting the lender/agent relationship

HousingWire

On today’s episode, Editor in Chief Sarah Wheeler talks with Jason Mitchell, founder of the Jason Mitchell Group, about recent lawsuits targeting the referral relationship between mortgage lenders and real estate agents.   Related to this episode:   Rocket Companies faces lawsuit over mortgage steering  https://www.housingwire.com/articles/rocket-mortgage-steering-lawsuit/  HousingWire | YouTube⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠  https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q  More info about HousingWire  https://lnk.bio/housingwire   To learn more about Trust & Will visit trustandwill.com   The HousingWire Daily podcast brings the full picture of the most compelling stories in the housing market reported across HousingWire. Each morning, listen to editor in chief Sarah Wheeler talk to leading industry voices and get a deeper look behind the scenes of the top mortgage and real estate.

Transcript

00:00You

00:05Welcome everyone.

00:09My guest today...

00:10is Jason Mitchell, founder of the Jason Mitchell Group,

00:13which is one of the fastest growing real estate...

00:15brokerages in the U.S.

00:17To talk about recent lawsuits targeting the referral relationship...

00:20between mortgage lenders and real estate agents...

00:22and where he thinks the risk lies.

00:24First...

00:25I want to thank our sponsors, Trust and Will, for making this episode possible.

00:29Jason...

00:30Welcome back to the podcast.

00:32Thank you for having me.

00:33I appreciate it.

00:34I appreciate you coming back...

00:35I think it's funny because I wanted to talk to you about lawsuits...

00:39and then we had to come...

00:40to define which lawsuits...

00:41because there's so many like...

00:43Well, you know...

00:45it has not gotten easier or smaller than number of lawsuits...

00:48like...

00:49it just feels like it's...

00:50it's like...

00:50those gremlins, right?

00:51They just are...

00:52are like...

00:53they're just multiplying.

00:54I also think...

00:55people are getting numb to it.

00:56Yeah.

00:57You know...

00:58I mean...

00:59I think that's the reality.

01:00It's just one after another.

01:00after another.

01:01And...

01:02and I think people are...

01:03starting to become numb to it.

01:05It's...

01:05it's unfortunate because the reality is...

01:07is that...

01:08this actually...

01:09hurt...

01:10hurts our industry...

01:11in mortgage...

01:12and in real estate...

01:13because...

01:14ultimately...

01:15you...

01:15try to defend yourself...

01:16and that cost millions...

01:17and millions of dollars...

01:18and ultimately...

01:19consumers pay the price of that.

01:20you know...

01:21because...

01:22people want to extort...

01:24and...

01:25try to have a...

01:26quick money grab...

01:27um...

01:28you know...

01:29it is unfortunate...

01:30but I guess it's the world...

01:31we're in today...

01:32but...

01:33I...

01:34I wish...

01:35I wish it could...

01:35just stop...

01:36I mean...

01:37every day...

01:38there's just a new lawsuit...

01:39it's just...

01:40it's not helping anybody.

01:40it's crazy...

01:41so the...

01:42the...

01:43most recent one...

01:44that I'd like to talk to you about first...

01:45or at least...

01:45in a larger sense...

01:46is the class action lawsuit...

01:48against rocket companies...

01:49right...

01:50which...

01:50is...

01:51steering...

01:52to specific...

01:53real estate agents...

01:54it goes to...

01:55um...

01:56home price inflation...

01:57how it hurts consumers...

01:58which is a...

01:59you know...

02:00we will...

02:00we hear echoes of this...

02:01uh...

02:02from the NAR commission lawsuits...

02:03and actually...

02:04um...

02:05one of the...

02:05law...

02:06law firms involved in this...

02:07is the same one...

02:08um...

02:09at that National Association...

02:10of...

02:10realtor's lawsuit...

02:11so...

02:12you know...

02:13this is a playbook...

02:14they're very familiar with...

02:15so...

02:16I know that...

02:15you know...

02:16you work with Rocket...

02:17right...

02:18Jason Mitchell Companies...

02:19you guys are...

02:20the preferred real estate group...

02:20for Rocket...

02:21Veterans United...

02:22New...

02:23New American Funding...

02:24Zillow...

02:25Opendoor...

02:26Marisave...

02:27whole bunch...

02:28so...

02:29...

02:34you know...

02:35you know...

02:36you know...

02:37you know...

02:39you know...

02:40you know...

02:45not my place, or any of my partners. But the troubling part

02:50is none of my partners, and I'm not

02:55their only partner by the way, they have thousands of partners, but I can speak

02:58specifically

03:00for us in these partnerships.

03:03There is no requirement

03:05to send your clients, to do anything in terms of making

03:10sure that the people we send you close with us.

03:15This isn't just Rocket, this is any, this is all of the partners that we have.

03:19There's never

03:20any measurement or indication of we want all

03:25of your mortgage business and all of the stuff we send you.

03:28You have to close that with us.

03:30It just, it doesn't exist. If it did exist, I can tell you that the four-year

03:35years that were spent with the CFPB, they would have found that. And if

03:40the question is, why is the closing ratio in the 60, 70 percent

03:45when a lender refers out a consumer, the answer

03:50to that question is, because they originated the consumer.

03:55The consumer has just spent an hour on the phone with a loan

03:58officer getting all their information

04:00pre-calling them and then pondering the question, do you have a real estate

04:05professional? And if the consumer says no, and the question is, would you like a

04:10business to connect you with a trusted one that we know in your local market? Well, that's the

04:15consumer's choice. But the closing ratio is because they've already done

04:20a lot of work, the consumer. It's like, why is it that the first real estate agent that

04:25shows up to the listing appointment gets the listing 78 percent of the time? Because their first

04:30first. And on the side of the referral,

04:35what I don't understand and what I can't and what I just

04:40can't get is if you're going to look at the referral side of it as some

04:45thing that shouldn't occur, if the consumer requests to work with a

04:50realtor because they don't have one, the alternative

04:55to not making that suggestion means what? What it means

05:00is that 80 percent of licensed real estate professionals last year,

05:0580 percent of licensed real estate professionals last year sold less than two houses.

05:10So if that consumer goes out to find their own real estate agent, they have a four

05:15in five chance of finding somebody that's not an actual true professional.

05:20Now, I'm not sure about you, Sarah, but if somebody can recommend

05:25me somebody that's a true professional that's vetted and

05:30very good at what they do, I'll take that referral rather than me going to

05:35guess.

05:36Right.

05:37I said on line two.

05:38.

05:39.

05:40.

05:41.

05:40.

05:44.

05:45.

05:50.

05:51.

05:56.

05:57.

06:02.

06:03.

06:08.

06:09.

06:16.

06:17.

06:18.

06:32.

06:34.

06:35.

06:36that you paid to the real estate entity that sent you that referral, those

06:41monies could be given to the consumer, so you're paying a middleman, and the real estate

06:46is that's not true, and the reason that's not true and

06:51why that has no water to it. When you look at a buyer broker,

06:56agreement, if real estate agents that receive referrals

07:01are upcharging their commission, their buyer broker commission, when they get referrals

07:06versus somebody that didn't have a referral applicable, then you're going to have to

07:11and you may have a problem, but the reality is not only do we not do that,

07:16and we have mandates on that, and it's obviously in our terms and conditions that you can't call

07:21it gouge just because you may have to pay more. Real estate agents don't.

07:26If the standard buyer broker commission that a real estate agent looks for is 3%,

07:31this is where that doesn't hold water. If it's 3% when I get a...

07:36referral is what my standard fee is, and 3% when I meet someone at an open house...

07:41Well then, the delta of that actually is from my services.

07:45Interesting.

07:46It was a world of, well I charge 4.5% when I get a referral, but 3% when I...

07:51I don't, yeah, that's gouging. That to me is a problem, but that's a real estate...

07:56independent contractor problem, not the problem that the referring source sent to you.

08:01So I would hope that in our industry and in our practices, and I can't speak for all...

08:06real estate agents out there, but your services are your services. It doesn't matter the source...

08:11your standard commission that you charge on a buyer broker agreement...

08:16is universal across the board. Now that can change, but what I'm saying is...

08:21you can't have agents that... you can't have real estate agents that say,

08:24I charge 5% when I get a referral...

08:26and then I charge 3% when I don't. I can tell you at JMG, it's not allowed to happen. We don't allow...

08:31it to happen. And I can't speak for anybody else, but that's where I think none of this referral fee has...

08:36has weight to it because I would venture to say in almost every case, the standard buyer...

08:41broker fee that a real estate professional charges is the same regardless if it's self-generated...

08:46or sourced from a referral partner.

08:48Right. One of the things that I have a hard time with...

08:51when it comes to especially class action lawsuits, because we know, first of all, it's not the...

08:56it's not the people who are supposedly harmed who get that money. They get like...

08:59Yeah.

09:00What?

09:01$16.00, $4.00, $4.00. It's... it is absolutely...

09:06the lawyers who get rich through this. And... but... but here, if we're talking about, you know...

09:11consumer harm in some way. For me, a lot of times I feel like it's... it's just treating the...

09:16consumer like a baby. Like you're infantilizing the consumer. If I'm sitting there...

09:21and I'm talking to you or talking to somebody as a mortgage loan officer and...

09:26and I say, do you... you know, who do you recommend? I... I'm asking you, who do you recommend? Because...

09:31I trust you...

09:32Of course.

09:33And I know that you... you might have a relationship with them that might... you know, whatever...

09:36I'm asking. I'm... I'm initiating.

09:38Well... listen. What you guys always say when you send out...

09:41great articles, housing wires say, go deeper. So let's go deeper on that, Sarah.

09:46every... almost... every transaction... almost...

09:51every transaction... in real estate... or mortgage... has a referral in some way, shape, or form...

09:56let me explain what I mean. If you're a retail loan officer, right? You're...

10:01your job is to... try to... work with real estate professionals to earn their...

10:06trust in their business. So... if you're a retail loan officer...

10:11and... and I... I find Sarah Wheeler as a client who wants to buy a home in Scottsdale...

10:16what do I tell her? Hey, by the way, I know Jason Mitchell, he's an exceptional agent in Scottsdale...

10:21would you like me to connect you? That's a referral. Right.

10:24Now the other way is... if...

10:26I find... a client at an open house or a friend or family member... and I say...

10:31have you talked to anybody about your financing? No, I haven't. Great. Let me connect you with my...

10:36guy... so-and-so... at so-and-so... he was really good at what they do.

10:41The... the client says, sure, I'd love to talk to them. Why? Because they trust my judgment.

10:46That... but that's a referral. How about any agent across...

10:51the country that has referred a client to somebody else in a different market...

10:56market center? So if I'm in Arizona, if I'm in Phoenix, and someone...

11:01is moving to Detroit, and I know a great agent in Detroit to help that client, and I call them up...

11:06and I say, hey, my aunt is moving back to Detroit. Can you help her? Yeah, sure.

11:11Great. Do you mind paying me a referral fee for that? Of course not. I'm happy to work with her, and I'm...

11:16happy to pay you for sending me that client. My aunt is happy...

11:21happy because she doesn't have to go do any of the legwork. She has a trusted agent in Detroit that's gonna...

11:26help her. And for me facilitating this, I'm gonna ask that real estate agent to pay me a referral.

11:31So tell me in any industry, especially in lending and mortgage...

11:36almost all of our transactions, in some way, shape, or form, come from a referral.

11:41So where does... Like where do you... So what you're saying is a consumer direct...

11:46loan officer, taking applications, can't refer...

11:51a real estate agent that they know and trust, but a retail loan office?

11:56that's how they make their entire living, all of them, is through referrals...

12:01through real estate professionals, but they can? The answer is no, and there's no difference.

12:05So this...

12:06this whole like trying to maybe clamp down on the referral space is ridiculous to me.

12:11because that's how our entire industry operates.

12:13Right. So, you know, you said you... you see a lot of...

12:16parallels between this and the CFPB suit. Of course, the difference there is you've got regulatory versus...

12:21you know, just a class action consumer lawsuit. For me, I look...

12:26I look at it and go, you know, I look at Sitzer Burnett or some of those big commission lawsuits and I go...

12:31and in that one, I... I could not... I sat through some of that trial and I'm just telling you...

12:36I could not find the consumer harm. I thought it was... I didn't feel like they proved their...

12:41at that point, I thought it was, you know, ridiculous. And they won, right? The plane...

12:46I think it's one there. So I... so I go, you know, this looks like to me, like, I think you and I were talking...

12:51about beforehand, you're like, you know, it seems like a nothing burger. That's what we've...

12:54we've heard from different people, too. I'm not...

12:56that's not legal advice, nothing burger. But like, there's always...

13:01because anytime you have a class action, anytime you go before a jury, anytime... there's a risk.

13:06that people see harm where, like, if you know the industry better, you don't see harm...

13:11or you understand the way things work, you don't see harm. So... so when you look at this, you know, is there a part of you...

13:16that's like, this could... this could have a big impact.

13:19You know, you... I guess you never know...

13:21because I can tell you during the NAR lawsuit, I'm sitting there saying, wait a minute...

13:26Attorney...

13:26Attorney's are suing real estate brokerages over contracts that they're...

13:31the industry prepared.

13:32Attorney...

13:33Attorney...

13:34Attorney...

13:35Attorney...

13:36Attorney...

13:37Attorney...

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14:00Attorney...

14:01Attorney...

14:02Attorney...

14:03Attorney...

14:04Attorney...

14:05Attorney...

13:41I think there's attorneys that are really good at getting people.

13:46To say, oh, well, Miss Consumer, Mr. Consumer.

13:49But the reality is, is.

13:51I don't I didn't see where consumers were harmed in that case.

13:55And in this case, especially.

13:56You.

13:57You.

14:00You're going to have.

14:01To prove that.

14:02You forced real estate professionals to use.

14:06You're lending institution.

14:10That.

14:12They tried to figure that out for four years and they couldn't.

14:15Because it never happened.

14:16Because it never happened.

14:17Right.

14:18Yeah.

14:19And it never happened.

14:20And I can tell you.

14:21And again, I don't want to speak on behalf of rocket or anybody else.

14:24That's not my place.

14:25I'm.

14:26I'm telling you what I know.

14:27And what I know is there's not a single lending partner that I.

14:31have or of the ones that, you know, we could name.

14:36That require any type of mortgage capture.

14:39That require any type of give back.

14:41If there was, we would have.

14:43We would have.

14:44Now, they say the reason that the case at the CFP.

14:46was dismissed was because the Trump administration came in.

14:50I will tell you there were.

14:51I think.

14:52And don't quote me on this.

14:53And I don't want to misspeak.

14:54But I believe there were 39 active lawsuits.

14:56At the CFPB.

14:57Um, when, when we.

14:59When I got sued.

15:00Um, when, when we.

15:01When I got sued.

15:02We were the first case dropped.

15:05And.

15:06And there's still cases with the CFPB.

15:07Everybody thought the CFPB would get totally dismantled in January.

15:10The CFP.

15:11The CFPB didn't.

15:12Didn't.

15:13Didn't really start getting dismantled until like April or May.

15:15There was still.

15:16And there's still active litigation going on.

15:17Right.

15:18What they looked at is which one is most frivolous.

15:20Well, thank.

15:21Thankfully, it was ours.

15:23But.

15:24That's because there was no.

15:26There's no merit.

15:27There's no merit.

15:28There's no merit.

15:29When you can't prove.

15:30That you were.

15:31Doing the things that you're suggesting that were done.

15:33Now.

15:34Again.

15:35However this plays out.

15:37I don't know.

15:38What I do know.

15:39And what we can prove.

15:40Is that.

15:42We get sent a referral.

15:44From our partnerships.

15:46And many other real estate agents as well.

15:49Get sent a referral.

15:50And it's.

15:51Very specific.

15:52Mrs. Wheeler is looking for a home.

15:55In Sacramento.

15:56California.

15:57Can you make sure to take care of Mrs. Wheeler?

15:59Yes, I will.

16:00Great.

16:01We're going to set.

16:01Send her to you today.

16:02And there's a reason.

16:03That.

16:04The majority of the time.

16:06If.

16:06Not.

16:07Almost all the time.

16:08I mean.

16:09Even if you look at.

16:10You know.

16:11We do what.

16:1112, 13,000 transactions a year.

16:14I think we had one consumer complaint.

16:16Last year.

16:17One.

16:18You know.

16:19I mean.

16:20It's crazy.

16:21This is a.

16:21And.

16:22And also too.

16:23Most of the time.

16:24The consumer.

16:25Does get.

16:26Some.

16:26Some type of.

16:27Lending credit.

16:28Or some type of.

16:29Um.

16:30Reward.

16:31By.

16:31Going down.

16:32This path.

16:33Not only do we have a trusted agent partnership.

16:35But also.

16:36We can credit you.

16:37And the reason they can credit you.

16:39Without damaging margin.

16:41Is because they will.

16:42Not the lending institution.

16:43But a real estate institution.

16:45Will collect.

16:46Some type of.

16:47Referral fee.

16:48From the agent's pocket.

16:49Not the consumers.

16:50The agent.

16:51The agent's pocket.

16:52To help credit the consumer.

16:53And save them money.

16:54Like who really pays in this.

16:56Is the real estate agent.

16:57Because.

16:58Their standard practice.

16:59Of commissions.

17:00Is the same.

17:01The same.

17:02And so.

17:03If that's the same.

17:04But I have to give up a point.

17:06Because I was referred this client.

17:08Most agents say that work referrals.

17:10Yeah.

17:11But I'd rather have that source of business.

17:13And not make as much.

17:14Commission on that client.

17:16Because it's a client.

17:17I wouldn't have had.

17:18Anyway.

17:19Okay.

17:20So let's talk for a second.

17:21About.

17:21Respa.

17:22Right.

17:23I mean.

17:24A whole other can of worms.

17:25But what do you think about.

17:26Is there something.

17:26There.

17:27That could be done.

17:28Respa.

17:29Reform.

17:30Or.

17:31Better.

17:31Definitions.

17:32Or whatever.

17:33That could clear up.

17:34Some of the.

17:35The problems.

17:36On that side.

17:36Transparency is everything.

17:37And.

17:38And.

17:39The more transparent you are.

17:40With the consumer.

17:41The better.

17:42The better it is for everybody.

17:43And so.

17:44If there.

17:45If there's something.

17:46That.

17:47I think.

17:48Potentially.

17:49Could happen.

17:50Um.

17:51I think.

17:52Disclosure.

17:53Potentially.

17:54On a settlement statement.

17:55That a referral fee.

17:56Was collected.

17:56I think.

17:57That.

17:58You know.

17:59When you go to close on your home.

18:00You.

18:01Like.

18:01It's already disclosed.

18:02Ahead of time.

18:03Well ahead of time.

18:04That.

18:05We're connecting with the real estate.

18:06Professional.

18:07We have a relationship with them.

18:08We may.

18:09We may.

18:10Um.

18:11We may collect a.

18:11Referral fee.

18:12Of some sort.

18:13So.

18:14It's already disclosed.

18:15But.

18:16I think.

18:17Maybe.

18:18Putting it on the settlement statement.

18:19You.

18:20You.

18:21You.

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