By Dan Freed
DETROIT (Reuters) - The connection between Quicken Loans Inc founder Dan Gilbert and billionaire magnate Warren Buffett became evident last month with news that Buffett was backing Gilbert's surprise bid for Yahoo Inc.
But the two men have another business connection that hasn't been reported: an exclusive mortgage-purchasing agreement between Quicken and a subsidiary of Buffett's conglomerate Berkshire Hathaway Inc.
Berkshire owns a company called Vanderbilt Mortgage and Finance Inc, which buys mortgages for traditional houses exclusively from Quicken, Buffett said in an interview. Vanderbilt's primary business is funding mortgages for Clayton Homes, the largest U.S. maker of mobile and manufactured homes, which is also owned by Berkshire.
"We buy a very few loans unrelated to the manufactured home business, and Quicken is the one we buy them from," Buffett told Reuters.
Quicken has been selling loans to Vanderbilt for nearly a year in a test program, spokesman Jordan Fylonenko said in an email. The partnership has led to about $20 million in closed loans so far, and Quicken is issuing new loans at a rate that would generate $50 million per year, he said.
Fylonenko declined to discuss the rationale for its program with Vanderbilt.
The purchases account for a small portion of either company's business. Quicken, for instance, generated $78.5 billion of mortgages altogether last year. Still, the arrangement shows that Buffett and Gilbert are looking for creative ways to work together.
Prior to this deal and the Yahoo bid, their only known business relationship was one in which Berkshire provided Quicken insurance for a NCAA basketball contest the lender sponsored in 2014.
Quicken had said it would award $1 billion to anyone who could perfectly guess winning teams throughout the season. The odds of success were miniscule – and no one won – but Quicken received a slew of email addresses and phone numbers for potential customers who entered the contest. It paid Berkshire a premium for providing the insurance.
Buffett and Gilbert met at a conference some years ago and became friends after having lunch together in Omaha, where Buffett lives. While speaking to Reuters about Quicken, Buffett expressed admiration for Gilbert's management style and boundless energy.
Meanwhile, in Gilbert's office there are three giant cutouts of Buffett's head stuck to a whiteboard, one of them autographed. The cutouts were made by a printing company Gilbert owns, called Fathead LLC.
"There could well be more business relationships in the future, but beyond that it's a friendship," Buffett told Reuters.
(Reporting by Dan Freed; Editing by Lauren Tara LaCapra and Brian Thevenot)