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After seeing its mortgage office count shrink this year for the first time ever, real estate franchising giant RE/MAX is bouncing back with the opening of new Motto Mortgage offices in Arizona, South Carolina and Michigan.
Since launching in October 2016, Motto Mortgage had enjoyed years of steady growth, with the franchisors’ open office count hitting 246 last year as it inched toward a long-term goal of having 1,000 locations nationwide.
This year, Motto Mortgage’s open office count has contracted a bit each quarter, as elevated mortgage rates slowed new franchise sales and put some existing franchises out of business.
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The 234 Motto Mortgage offices open nationwide as of Sept. 30 represented a 5 percent decline from last year’s peak, parent company RE/MAX Holdings disclosed in reporting third-quarter earnings.
Erik Carlson
“We’re feeling the effects as the number of open Motto offices is declining slightly for the first time ever,” RE/MAX CEO Erik Carlson said on the company’s Nov. 1 earnings call. “Franchise sales have slowed and a few existing franchises have terminated due to their financial position, lack of transaction activity or not being connected to the real estate transaction.”
Motto Mortgage office count contracts
Source: RE/MAX Holdings Inc. earnings reports.
Motto Mortgage doesn’t make loans itself but provides technology, training and marketing tools for mortgage brokers who work with wholesale lenders like UWM, the nation’s biggest mortgage lender. Each Motto Mortgage franchise is independently owned, operated and licensed.
Franchisees sign seven-year agreements directly with Motto Franchising, and 2024 is the first full year the company has had offices come up for renewal. RE/MAX also provides third-party loan processing services to mortgage brokers through another subsidiary, wemlo, which it acquired in 2020.
“While Motto has seen some of those terminations increase during the past year as the macro economy changes, we do believe we’ll be able to start growing that open office count again soon,” Carlson said.
Carlson said September was the best month of Motto franchise sales since March of 2023 and that wemlo also had its best month of the year for loan submissions.
“Despite this recent bright spot, continued elevated mortgage rates have made it a tough time to be in the mortgage business,” Carlson said.
RE/MAX’s mortgage business in the red
Source: RE/MAX Holdings Inc. earnings reports.
While RE/MAX’s Motto Mortgage and wemlo businesses generated $14 million in revenue last year, the mortgage segment produced a $6.9 million adjusted EBITDA loss (earnings before interest, taxes, depreciation and amortization)
During the first nine months of 2024, RE/MAX’s mortgage segment generated $11.05 million in revenue, up 6 percent from $10.44 million during the same period a year ago, the company said in its most recent quarterly report to investors.
Through Sept. 30, RE/MAX’s mortgage segment generated a $3.96 million adjusted EBITDA loss, a 28 percent improvement from the $5.54 million adjusted loss seen during the first nine months of 2023.
Rising mortgage rates made 2023 a difficult year for lenders. By the end of the year, 56 Motto offices were receiving short-term financial relief and weren’t being billed or had fees deferred, RE/MAX disclosed in its most recent annual report to investors. That’s down from 58 offices receiving relief at the end of 2022, but up from 31 offices in 2021.
“There’s a lot of headwinds on the mortgage side,” RE/MAX Chief Financial Officer Karri Callahan acknowledged on the company’s Q3 earnings call.
Karri Callahan
“I think the thing that’s really exciting is we’re still seeing interest” from potential mortgage franchisees, Callahan said. “While there’s still a little bit of mud in our boots from a collections perspective on the mortgage side, I think operationally there’s some cautious optimism that we’re moving in the right direction.”
Most Motto franchisees are real estate brokers
“Other Real Estate” includes national franchisees other than RE/MAX, local brokerages and teams from other brands. Source: RE/MAX 2023 annual report to investors.
Historically, close to three-quarters (73 percent) of Motto franchise sales have been made to real estate brokerages that want to get into mortgage lending, and just over half (51 percent) have been affiliated with RE/MAX.
But last year, brokerages affiliated with RE/MAX accounted for only 18 percent of Motto Mortgage franchise sales.
That’s the case with the most recent Motto Mortgage office openings, including Motto Mortgage Limitless in Pinetop, Arizona, led by mortgage industry veteran Deb Gaustad.
Gaustad’s four decades of loan origination experience includes stints with Flagstar Bank, Movement Mortgage and Fairway Independent Mortgage Corp.
Deb Gaustad
“Motto Mortgage Limitless offers an advantageous alternative to the traditional mortgage bankers currently operating in Pinetop,” Gaustad said in a statement. “We provide the scope, scale and support of a large retail lender, while offering the flexibility, autonomy and exceptional service of a local mortgage broker that knows how to navigate the intricacies of the home buying process in your market.”
Motto Mortgage Limitless will serve all Arizona markets, the company announced Monday.
Last month Motto Mortgage announced the opening of a new office in Greenville, South Carolina — Motto Mortgage Community Solutions — serving all markets in the state and North Carolina, Georgia and Florida.
Shatoya Cobb
Owner Shatoya Cobb‘s five years of industry experience includes positions at U.S. Mortgage Lenders LLC and Southwest Funding.
Loan originators Yolonda Lowe and Leon Paz bring nearly a decade of combined industry experience, Motto Mortgage said.
“I like to think of myself as a personal home loan shopper scouring mortgage loan options to find one that helps my clients reach their homeownership goals,” Paz said, in a statement. “Being fluent in English and Spanish, I am uniquely positioned to support my borrowers and am dedicated to finding the most competitive loan program for each client’s unique financial situation.”
In August, Motto Mortgage announced the opening of a new office in Marquette, Michigan, Motto Mortgage Express, serving all markets throughout the state.
Jackie Menhennick
Motto Mortgage Express Vice President and operations manager Jackie Menhennick has more than 30 years of mortgage lending and management experience, Motto Mortgage said.
In April, Motto Mortgage announced two original Motto franchise owners — Motto Mortgage Prosperity and Motto Mortgage Supreme — had renewed their licenses.
This year, Motto has also announced the opening of Motto Mortgage Royal and Motto Mortage INVICTUS in Florida; Motto Mortgage Sail Home in New Hampshire; and Motto Mortgage Premier Pros in North Dakota.
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