Editor’s Note: This is part of our continuing monthly series on affiliated companies. Our goal is to feature companies which have had history and experience with affiliated business to learn about their success and share the RESPA compliance lessons they have gained in these affiliations over time.  

Last year, Denver-based Motto Franchising, LLC announced that its Motto Mortgage network of offices closed more than $1.1 billion in loan volume and helped more than 5,000 families become homeowners.

“In our third year, we closed more than $1 billion in loan volume, which I feel really good about,” Motto Franchising President Ward Morrison told RESPA News.

Motto Mortgage – the first national mortgage brokerage franchise in the country – was launched in October 2016 as the second member of the RE/MAX Holdings, Inc. family of brands. There are currently more than 100 Motto Mortgage offices open in more than 30 states.

Each office is independently owned, operated and licensed. But the company says they all share the same focus: transparency and compliance.

RESPA and consumer choice

All Motto Mortgage offices have the same branding, technology and compliance strategy in common.

“The first thing is, disclosure, disclosure, disclosure,” Morrison said. “So they disclose from the mortgage side that they own a real estate company, and they disclose from the real estate side that they own a mortgage company.

“Eighty percent of our franchises are tied to a real estate company, so we’re really trying to live  compliance around RESPA. We emphasize you can’t steer, mandate, direct or incentivizes their agents. Those are words we try to take out of their vocabulary. Consumer choice is the most important thing for RESPA, and that’s what we want to do: disclose that the consumer has choice.”

Motto Mortgage provides Ellie Mae’s Encompass loan origination software system to all its franchises.

“In there, the disclosure is part of the package,” Morrison said. “You can’t do a package in Encompass without disclosing the affiliated business arrangement. So that’s mandated in that. We provide them templates and procedures around providing disclosures from the real estate side as well.

“Because we use Ellie Mae Encompass, we have an online point of sales system, so people can fill in their application right in there. Then you have Ellie Mae’s borrower portal where people upload documentation, and we can send documentation down to our client in an encrypted setting. Within that, we are disclosing in our documents that we have an affiliated business, and that you have a choice – if you don’t want to use our affiliated business, you don’t have to.”

10-factor test still best

During compliance training, the company stresses the Department of Housing and Urban Development’s 10-factor test that was issued in 1996 to address the problem of real estate brokers who failed to create bona fide settlement service providers and instead had companies with no employees, no separate space and other issues that raised red flags that a partnership was not a genuine joint venture.

“The RESPA 10 point test of affiliated businesses is something we teach to during training,” Morrison said. “Do you have your own space? Are you performing core mortgage functions?  Are you actively out there competing for other business so you’re not a sham affiliated business? You want to make sure they’re out there. Although we capture a lot of the real estate company’s business that they’re tied to, they still get a majority of business  from other agents, and other consumers.”

The company also emphasizes the proper way to co-market in its compliance training. For example, if two entities sponsor a little league team together 50-50, each must bring 50 percent to the table.

Motto Mortgage also encourages its network to join industry trade groups, including the Association of Independent Mortgage Experts, National Association of Mortgage Brokers, and to a smaller extent, the Mortgage Bankers Association.

And as a franchisor, the company tries to give as much guidance as possible.

“The No. 1 thing we provide is compliance policies and procedures,” Morrison said. “We give them compliance manuals, audit support and make sure they’re passing their state exams. We give them training and great technology.”

Other companies affiliated with RE/MAX

In 2018, RE/MAX acquired a real estate technology company called booj, a real estate web development and software firm based in Colorado. In 2005, booj began providing technology to help real estate brokerages stay competitive in their local markets – including websites, mobile apps and reporting to site tools. Less than two years after acquiring the software firm, RE/MAX launched the booj Platform, an integrated suite of digital products exclusive to RE/MAX agents that will empower high-producing agents, teams and brokers to proactively establish, manage and grow client relationships.

At the end of 2019, RE/MAX acquired a company called First, an artificial intelligence lead generation company designed to help agents position themselves to earn more business from people they already know.

“First provides the ability for someone to upload their database of existing contacts,” Morrison said. “It can predict with some level of certainty whether somebody’s going to list or buy a home based on things they’re doing in the marketplace. It comes back and offers those up to the agent to contact those people to see if they’re ready to list or sell their home.”

All four businesses help facilitate the one-stop shopping experience for the consumer.

“We’re really focused on growing the RE/MAX and Motto side of the house, then adding those pieces like First and booj,” Morrison said.

Meanwhile, the company’s compliance philosophy hasn’t changed since the pandemic began. What has changed, though, is that the digital transaction has become more important than ever.

“We are seeing during this pandemic that digitization from the mortgage transaction has taken a five- or 10-fold increase in usage, so everybody is using our point-of-sale system, whereas before they might have elected documents via in-person,” he said. “Now they’re saying, ‘Just upload them so that we don’t have to be in contact.’ ”

Because each office is independently owned and operated, they’ve all found different ways to operate efficiently during the public health crisis.

“For instance, in Pennsylvania and a few other states, our Motto Mortgages were basically shut down for a significant time period,” Morrison said. “Those states decided that residential real estate and mortgage were nonessential, whereas real estate and mortgage were deemed essential in the vast majority of states. Luckily because of our digitization, they can work from home, and can make things encrypted and private. A lot of offices either have skeleton crews or have people working from home and just using Zoom to stay in contact with clients. This pandemic has shown people’s resilient nature and how we can adapt.”