Since launching in 2016 as the country’s first national mortgage brokerage franchise, Motto Mortgage has steadily gained traction and visibility in the real estate industry. As 2022 comes to an end, Ward Morrison, president and CEO of Motto Franchising, LLC, spoke with RISMedia about where he thinks the company is heading, while also reviewing its past.
Michael Catarevas: You said earlier this year that Motto Mortgage was hoping to have over 1,000 franchises, but that was before mortgage rates started rising dramatically. Have you had to reassess?
Ward Morrison: That’s still our long-term vision…it was never about the end of the year. We’ve sold over 300 franchises in our first six years. We have more than 200 open offices in 40 states, and our goal is to have 1,000 open offices. Whether that’s in three years, five years or seven years, that’s still our goal: to have 1,000 independently owned and operated franchises throughout the country.
MC: What are the major challenges ahead for Motto Mortgage, and how do you plan to address them?
WM: Obviously the macro environment; the rate environment is unusual. People call it the new normal. I call it the normal normal. Meaning I started lending when rates were 9%, so when it got down to 7%, it was free money. What we have to do is give it some time for millennials and Gen Zs to adapt to what is actually the 30-year average, which is 7.1%. It’s just going to take time for people to settle down. We need to see home prices that are always inverse to mortgage rates go down a little bit. As soon as we see some of the tempering happen, we’re going to see the market do what it always does. There’s still going to be homes sold. I’ve seen different numbers from the FHA, Fannie Mae, everybody…about how many homes we’re gonna sell. We’re still gonna sell anywhere from 4.7 to 5 million homes. Five million is an average year. 2021 with six million was an unusual year. Demand is still there. It’s just getting people to adjust to that macro economy and what it did to the rates, and just see that it’s not what I call Chicken Little .
MC: What differentiates Motto Mortgage from other companies?
WM: The thing we have going for us is that the mortgage broker channel is unlike the mortgage banker channel. You look at the mortgage banker channel today, as soon as the refis disappear…a lot of them tend to be refi shops and have very high overhead, whereas an individual broker does not have a lot of overhead. And we try to keep the fees we charge our franchises in check. So combined, it is a model that’s going to be able to survive the test of time, because they’re in the local market, they’re connected to multiple wholesalers so they can provide consumers a choice, whereas with a mortgage banking firm, you can only get their product. The mortgage broker channel has made a comeback, and I think it has legs as well.
MC: How involved are you with franchise owners, and what, if anything, do they seek once they’re on their own?
WM: We sell the franchise to an independently owned and operated owner, and it’s up to them. They get licensed. We’re not licensed, we’re not a lender, we’re not a bank. So we don’t get involved with them day to day. We provide education, some initial compliance set-up, technology, marketing, processing, recruiting and the connection to wholesalers. But we don’t get involved with the operation of their business except to help them try to maintain profitability.
MC: With the way mortgage rates have surged and the impact that has had on the lending sector, where do you see opportunities for Motto to thrive while others struggle or falter?
WM: The biggest thing for us is that we believe that 1,000 franchises is possible. We sell like 73% of our franchises to real estate companies or real estate teams. We’re finding as we sell to more real estate companies as a legal and compliant-affiliated business that they’re able to weather storms because they focus on purchase money, not refinance. They have the connection to the agents in the offices right there, while the industry is going to have challenges with the refi boom gone. This is a time where our owners who are tied to real estate are really leaning into this market and are going to keep it. So the challenges the industry sees I don’t think are going to be the challenges Motto sees. In general, I do have concerns around the wholesale channel, having some players recently close shops. But I think there are so many good wholesalers out there who are going to weather this as well that not having the access to products is not going to be a concern.
MC: What’s your day-to-day like?
WM: I travel to a lot of industry events. You name it, we try to go to it. We just had a Motto Tools and Tech tour where we went to different parts of the country trying to teach our owners tools and technology in person. I travel around to make sure we’re touching base with the clients and making sure our independently owned and operated franchisees are happy.
MC: What is your industry outlook going forward?
WM: The macro economy is the macro economy. As mortgage people, as real estate agents, the job is to be a trusted advisor in these types of times when what appears to be uncertainty isn’t really uncertainty. Again, it’s just the normal normal. The consumer is leaning on the real estate agent and loan originator to get them with the right product. Homeownership is still one of the best things out there as a long-term savings vehicle. I think there are opportunities if the Fed slows down to see rates go down a little, into the 5% or 6% range. My parents bought their home at 18%. Then they simply refinanced.