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Mortgage Broker News | 16 Jul 2014, 10:16 AM Agree 0
One of RateHub's largest broker clients is contemplating legal action against a former employee now tapped to head the rate site’s online brokerage, currently in development.
  • Dave | 16 Jul 2014, 11:02 AM Agree 0
    This should be interesting....
  • AnthonyC. | 16 Jul 2014, 11:12 AM Agree 0
    ...and it begins...
  • Jake Abramowicz | 16 Jul 2014, 11:20 AM Agree 0
    " “We also considered him looking at originating B-mortgages as well.”

    This is a very hard thing to do IMO, and not a good strategy with respect to a site like ratehub, that has made its money on shopping rate only. I'll let Alyssa and her team figure out why this is the case, though.
  • Lior, Mortgage Edge | 16 Jul 2014, 11:34 AM Agree 0
    I second the motion of the "B" deals. About 75% of my work is alternative mortgages and these deals don't come from cyberspace. Typical online "B" deals would be people who have 450 beacon and 5,000 in the bank looking to buy a 400,000 home. Not exactly promising. You need alliances with people who actually have access to those type of clients.
  • Not using RateHub | 16 Jul 2014, 11:51 AM Agree 0
    I've never used RateHub, so I have never read the terms outlined in their broker agreement. Does RateHub retain the contact information of the leads they process, and will they be allowed to target these clients when they become a brokerage? If so, they will be starting off with a large list of clients and will fight to take away the very leads they provided to the agents who paid to use their service.
  • Jake Abramowicz | 16 Jul 2014, 12:33 PM Agree 0
    Of course they do, and hence, the brokers who do use it can't see the forest from the trees. they look at the calendar and it says july 15th 2014, and every day is a new day. If this is how they operate their business, I wonder if that's the type of advice they give to their clients. Carpe Diem? I don't think so, not in my world.
  • Not using RateHub | 16 Jul 2014, 12:45 PM Agree 0
    Thanks Jake. I'm glad I did not choose to build my business using RateHub. It looks like the agents using their service should rethink their business model.. and do it quickly!
  • ha ha ha ha | 16 Jul 2014, 12:59 PM Agree 0
    If you do the math you will see that these sites are a complete waste of time. Here is the math:
    -cost per lead is $70. Cost per click is $7. On average, click costs represent 50% of overall costs. As such, the average lead costs $140. Funding on these leads is a mere 10%. If you are good, you could get to 20%. Lets assume 20% in this example. As such, your cost per closed deal is $700 ( 5 leads @ $70 + click costs @ $70 = $140 * 5 = $700). You have worked on 5 deals and only closed one at a total cost of $700.
    On average, these are $300,000 (I’m being generous here) deals which you would have to buy down 15bps to win lead. Assuming you make 100bps allin, this leaves you with comp of 37 bps (buying down 15bps will cost you 63bps in comp). On 37bps on a $300,000 mortgage, you make $1,100! After your cost of $700, you are left with $400. Oh almost forgot, these ‘nickle and dime’ leads never want to pay for an appraisal do now you are down to $150.
    To summarize, you work on 5 deals, close one and end up with $150. How much is your time worth when you spend countless hours working those 5 leads and only close 1? The rate site, on the other hand, makes $700, does nothing, keeps the contact of all your leads and can go after them at will, charges multiple brokers for the same leads (even though they say they do not we all know this happens).
    The short sighted brokers that use these sites did this to themselves. Good for the rate sites in competing with you brokers. If you are stupid enough to be part of this program then you deserve this.
    Looking forward to see how long it takes before the other rate sites also start to compete (hint – 2 of them already do).
  • Ron Butler | 16 Jul 2014, 01:03 PM Agree 0
    @ Not using.............. we all need to adapt origination models that work for us.

    That being said; up to this moment by using RateHub as a source for some (not all) of his leads Dan Eisner (with a heck of a lot of work and ability and help from his staff) has built a billion dollar mortgage brokerage. I think that says something about the man and business model.
  • Jake Abramowicz | 16 Jul 2014, 01:09 PM Agree 0
    Ron Butler, do you use Rate Hub?
  • Ron Butler | 16 Jul 2014, 01:22 PM Agree 0
    @ Jake...... we do not currently use RateHub but we use 3 other rate sites.
  • Kent Farnsworth | 16 Jul 2014, 03:27 PM Agree 0
    From what I have been told, these non-compete clauses aren't worth the paper they are written on, as they would effectively stop a person from earning a living in the business that they are a part of. That in itself is apparently illegal, making the clauses themselves incredibly difficult to enforce. Of course just because I have heard this certainly doesn't make it necessarily true at all. Although I am quite interested to see how this all of this will unfold if Eisner does decide to sue Laird.
  • Ron Butler | 16 Jul 2014, 03:37 PM Agree 0
    Non Compete clauses are very real but often subject to a ton of litigation. Most of them are limited to 2 years based on legal precedent but they are definitely enforceable, happens everyday. That being said, the only people who are always successful in litigation are the lawyers.
  • AnthonyC. | 16 Jul 2014, 03:40 PM Agree 0
    the non-compete doesn't apply to your commissioned sales people (mortgage brokers, financial planners, realtors, car sales, insurance sales etc...)...your right, you cant stop someone from making a living.

    However, the clause can be upheld when its concerning the migration of senior management to another firm and starting a new entity mirroring their previous employer's business model/employment/position with the concern over the loss or dissemination of proprietary technology or the duplication of management practices/models/theories applicable to the claimant's business model...this exact thing happened to my Brokerage's C.E.O. when he left a major start-up which he was a principal to...was frozen for several years before he started the new brokerage...

    Either way, Laird/Eisner could be headed for some challenges trying to defend their respective positions...
  • Jake Abramowicz | 16 Jul 2014, 09:15 PM Agree 0
    not worth the paper they're written on, but worth the thousands in legal bills that they will both incurr during this fight. verico can't tell me not to be a broker if I left them (I'm not with them but just as an example), but, you're right - if i'm a manager at a company of course I may be asked to sign a non-compete if I leave - too many trade secrets etc.

  • John Bargis | 16 Jul 2014, 11:48 PM Agree 0
    Rate Hub's decision to step into the Broker arena as an originator is no surprise. How can any rate site expect to generate serious revenue without the mass participation of the industry, or when the few broker clients of the rate sites cannibalize each other for the business, with the lowest rate being the winner? This is really no different than "Rate Spy's" affiliation with intelliMortgage. It will be interesting to see if Rate Hub's broker clients continue to support the site, which makes no sense with the clear conflict.

    I've said it before and I'll say it again, the vast majority of business is generated with three key words in mind, "Relationship, Relationship, Relationship." These three words help build a strong business model for the long term, with a loyal client base.

    As for the potential conflict between Rate Hub, James Laird, and True North, the breach of covenants of a contract, (which includes a non-compete clause of a controlling mind and partner of a business), is a very serious issue and can very much be challenged in a court of law, especially if damages are at issue. If in fact the non-compete in this case is valid, (and the legal system will determine that), it wasn't very prudent of Rate Hub to engage in discussions with one bound by contractual covenants, especially while still with their former firm, followed by a public confirmation of their actions....Best of luck to all parties involved on this one.



  • Busy Broker | 26 Mar 2015, 02:20 PM Agree 0
    The Mortgage Industry is no place for bullying former employees or trying to prevent others from having success. There is plenty to go around. All the best Laird.
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