A look at Knock’s reversed pay cut decision and LO layoffs
Over the last several weeks we’ve seen layoffs of mortgage loan officers and other staff at Freedom Mortgage and Interfirst Mortgage, as well as a complete PR nightmare that resulted from Better.com laying off 900 staff members on a disastrous Zoom call.
This week, Senior Real Estate Reporter Matthew Blake wrote about how Knock, a “power buyer” and mortgage lender, announced it was going to cut LO salaries on Tuesday, then reversed course after hearing from its staff. On this episode of HousingWire Daily Editor in Chief Sarah Wheeler interviews Blake about his reporting on the Knock story and what it might mean in the context of a quickly changing home-buying landscape.
Here is a small preview of the interview, which has been lightly edited for length and clarity:
Sarah Wheeler: Walk us through what happened: first, what was the whole controversy about what Knock did at the beginning, and then, what they changed?
Matthew Blake: Knock would take pains to tell you that they do not do mortgage refinancing. So, the problems that are being experienced by Better, Freedom are not quite the problems that they’re experiencing. But basically, they’re in a situation where every week I get a press release from them saying, “We’re expanding into Baltimore, we’re expanding into different markets,” and they’re trying to increase the amount of purchase volume that they do.
Their loan officers are paid about on average $75,000 a year. And so, they wanted to reduce by a third that base pay, but have it more of compensation or commission-based pay structure. This was announced on Tuesday, the employees were very upset by it. They were upset by the fact that they were not informed by Shawn Black or Jamie Glen, the Chief Operating Officer of Knock, but instead were informed by the Director of Sales, and all this is remote. There are a lot of discussions over Slack, over video about this. And so yesterday, Thursday, Knock reversed course, and they said that they would keep the base pay the same starting in January, but increase the amount that the loan officers could earn through commission.
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Below is the transcription of the interview. These transcriptions, powered by Speechpad, have been lightly edited and may contain small errors from reproduction:
Sarah Wheeler: Welcome, everyone. This is Sarah Wheeler, editor in chief at HousingWire. And I’m here with our Senior Real Estate Reporter, Matt Blake. Matt, thanks so much for jumping on to talk about some of the news that we’ve been covering this week.
Matthew Blake: Yeah. Excited to sort of go through some of this. Thanks.
Sarah Wheeler: You know, one of the stories that really caught my eye and drove a lot of traffic this week was a story that you did on Knock, which is a power buyer. And that first it had plans to cut salaries of its LOs, and then, you know, it reversed course, but first let’s talk a little bit about who Knock is and what a Power Buyer is.
Matthew Blake: Sure. So, Knock started in 2014 by Sean Black, who used to be an executive at Trulia. And basically, their business model has been tweaked a little bit through over the years, but they are, as you say, a power buyer. And that basically means that they help consumers with a home swap, in which, basically, their role is to provide a cash offer to a home seller because in a low inventory market particularly the cash offer is seen as more appealing to the seller. And so, in turn, they’re giving the consumer the cash offer, but then they’re requiring that the consumer take out a mortgage loan with Knock. And so there are different iterations of the power buyer ribbon, orchard. They have, like, somewhat different models. But the basic idea is that they’re providing the consumer mobility in this high-demand market by providing a cash offer. So, they’re kind of a mortgage company, they’re kind of a mortgage lender, but they’re kind of this other sort of thing. And that’s kind of what maybe leads into them being at something of a crossroads right now.
Sarah Wheeler: You know, we see this throughout the mortgage industry, right? Like last year 2020 into 2021 was huge volume, record volume so people staffed up especially with LO’s. And a lot of them took the opportunity to… There was so much competition for underwriters, for LO’s, for whatever is that they brought some new people into the industry. And now with volume following and looking towards 2022, which is going to be much more purchase and less refi. They’re not the only ones who are looking at like, “Okay, what does this mean?” But walk us through what happened first, what was Knock? What was the whole controversy about what Knock did at the beginning and then what they changed?
Matthew Blake: Yeah. So, I mean, Knock would take pains to like tell you that, you know, they do not do mortgage refinancing. So like the problems that are being experienced by Better, Freedom are not quite the problems that they’re experiencing, but basically, they’re in a situation where, you know, every week I get a press release from them saying, like, we’re expanding into Baltimore, we’re expanding into different markets. And they’re trying to increase the amount of purchase volume that they do. And so what I think they wanted to do, they have about 30 loan officers, the company says, and I think that they wanted to make the compensation of their loan officers much more sort of performance-based like Sean Black. His background, I’m just sort of speculating a bit here, but Sean Black, his background is in real estate and real estate agents, entirely commission-based, entirely performance-based.
And I think maybe Knock was looking to have their loan officers be paid in a similar way. And their loan officers are paid about on average, $75,000 a year. And so, they wanted to reduce by a third that base pay, but, you know, have it more of commission-based pay structure. And so this was announced on Tuesday, the employees were very upset by it. They were upset by the fact that they were not informed by Sean Black or Jamie Glenn, the chief operating officer of Knock, but instead were informed by the director of sales at Knock.
And so there were a lot of, you know, all this is remote. There were a lot of discussions, you know, over Slack, over, you know, video about this. And so, yesterday, Thursday, Knock reversed course, and they said that they would keep the base pay the same starting in January but increase the amount that the loan officers could earn through commission. So Knock is a private company, I don’t know their financials. They say that they’re growing very fast. But again, my inference here is that they want to make their loan officers paid more based on their performance as opposed to sort of a salaried employee.
Sarah Wheeler: Well, it sounds like they really heard their employees that there was a lot of unrest. And it said that your reporting says that, you know, after having a number of one-on-ones they reversed course. So, were you hearing from different people within the company during that time?
Matthew Blake: Yeah, I think you’re right that they did hear from their employees. I mean, one, the employee that I spoke the most with who’s requested anonymity, but is a loan officer. And the loan officer told me that they felt satisfied by what happened. They felt satisfied that they were being heard. Knock has a mantra, it’s available on their website called POPSICLE. And POPSICLE is that you’re supposed to be passionate and open at your job. I forget the rest of that acronym in POPSICLE, but the first two are passionate and open.
And, you know, loan officers I was speaking to on Wednesday night were like, you know, “What the hell? Like, well, I thought we were supposed to have an environment where we can, like, directly communicate with management on these kinds of things.” But then, you know, I only talked to a couple of folks, but I guess that they were satisfied with what Jamie Glenn, the chief operating officer said. So, I mean I don’t know completely the morale there, but it does sound like there was a process by which, you know, at least some of their issues and the main issue of getting their pay cut was addressed. So…
Sarah Wheeler: Really interesting. And, you know, as I referenced, I mean, there’s gonna be more of this, right? And it sounds like Knock is actually not laying anyone off, not now, you know, reducing salaries. We are seeing other people do that, right? Specifically mortgage lenders. So, you know, probably in the last week, one of the biggest articles we had was about Better and how that whole process went down. So you would think that, you know, people looking at that situation are taking notes about how not to do this, right?
So, the fact is, I mean, we’re remote, most people are remote, so to me, the problem with that whole thing wasn’t, like, you know, everyone’s like, “Oh, he did it on Zoom,” which is, you know, that’s terrible. On the other hand, what are your options?
Matthew Blake: Right. Yeah.
Sarah Wheeler: If you do have to communicate things to staff, I mean, you’re remote, they’re not in the office. You can’t call them in, you can’t fly them in to let them know they’re laid off. So I think it was less the remote part of that and, obviously, more the way that it was handled.
Matthew Blake: Yeah. I think that it was really interesting, right. I mean, you’re not, so you are supposed to like fly in employees and then tell them in person that they’ve been laid off. I think what bothered people and, you know, Maria Volkova a mortgage reporter, like she’s done the reporting on this, but I mean, just my sense is I think what bothered people is that kind of that he Vishal Garg, he sort of made it about himself in the Zoom call, I guess. In my own reporting experience, I covered the Zillow Earnings call a month ago where Rich Barton announced that there would be a quarter of their staff would be laid off, 2,000 people, due to their winding down of iBuying. And, you know, I don’t think that he, like, handled that particularly like well or poorly, but one thing that sort of, like, raised my eyebrow was that he was sort of, like, “This is very emotional for me. This is very hard for me.” Like, he kind of made it about himself and sort of his own, like, emotional processes and sort of laying off employees.
And it seemed like Vishal Garg did a sort of similar thing. Like, “I hope I don’t cry this time.” And I think that that strikes me as, you know, maybe you just wanna sort of say what’s happening and not say like how it’s making you feel that you’re causing this pain for the other person. But, you know, I think that it’s pretty hard to know sort of what the proper way is to handle it. I mean, in terms of the larger mortgage market, you know, as a real estate reporter of the company, like Better was really fascinating because they were moving fast, they were getting into real estate, they were getting an entitle. And now all these companies that we’ve been writing about for the past year that seemed like they were sort of like on the move. Maybe they’re kind of retrenching right now and maybe curbing their ambitions a little bit.
Sarah Wheeler: Yeah. This next year is gonna be fascinating. It’s funny that you say that about, you know, Rich Barton saying that on Zillow, or Vishal Garg’s saying that because to me, I would think that was a good thing. Like, I wouldn’t think, “Oh, they’re making about them,” I would wanna know that they at least care. Like, they’re not, like, “Hey, this is the funniest part of my job is laying all, you know, losers off.” But more like, you know, that it’s weighing on them as I think that it would on anyone. You know, build a company, the goal is never like, “Wow, I hope that I, you know, have to lay people off.” So that’s just me.
Matthew Blake: Yeah.
Sarah Wheeler: So, but I think it’s just fraught with peril when you’re on a call with so many people because people are gonna take it different ways. You know, probably having more of a manager-level conversation might be better. I mean, what do I know, right? But I’m just saying, like, I just think it’s this whole thing is something our industry is gonna have to reckon with because we’re now in this, you know, in a space where we expect to see some more layoffs and we are still…many people are remote. So I think it’s gonna be a story that we’re gonna continue to cover.
Matthew Blake: Yeah, I know that’s… I mean, yeah, no, I think you’re absolutely right. I mean, it’s something that, you know, I haven’t totally thought through I mean, I guess, like, a layoff before would be sort of, I mean, I was laid off once, you know, that my employer closed the door, spoke to me one on one in a closed-door meeting. And I think that you know, I mean there was no like you’re never gonna get a situation where like people are like commenting on Reddit like, “Wow, Vishal Garg did a wonderful job laying these people off.” Like what an exemplary performance of like, you know, like professional ethics at its best in laying these people off. Like, I don’t think there’s like a way to lay people off that is probably, you know, will be seen as, like, tactful by people just upset but by the actual news. But I do think it’s much harder now and I think that, you know, and the Knock, to go back to that briefly, you know, I think it was interesting that basic employees were able to sort of mobilize and get their voices heard just mostly over Slack and over virtual communication this week.
Sarah Wheeler: Really interesting. You know, other companies that we’ve covered this week, not just this week, maybe over the last couple weeks, Interfirst Mortgage was laying off LOs and we had a Freedom Mortgage, but those were seemingly specific locations as opposed to like nationwide which, you know, you can see how that might happen, but we’re gonna be keeping an eye on it. Continue to report on this great reporting on this one. iBuyers in general, or now some of them who would consider themselves Power Buyers and not iBuyers, it’s gonna be really interesting over the next year, just to see like, you know, if the market indeed cools off and that’s just because maybe, you know, we don’t have a whole lot of inventory or, you know, what happens with mortgage rates, whatever. If you see that, like, what role will they continue to play? How will they evolve to really meet the needs that people need in a changing market? So it’s something we’re definitely gonna be continuing to look at.
Matthew Blake: Yeah. For sure, yeah. I think there’s gonna be, maybe some of it is sorting out of some of these newer companies if the market cools, but very interesting heading into next year.
Sarah Wheeler: Well, thanks so much for jumping on to talk about this. This is kind of the new format we’re gonna do with “HousingWire Daily,” which is, look at the stories that are just happening and talk with the reporters who have the insight into, you know, they’re the ones who are talking to sources, they’re the ones who do the background. So I appreciate you jumping on for this talk.
Matthew Blake: Thanks a lot, Sarah.
Sarah Wheeler: Thanks, Matt. Bye.