United Wholesale Mortgage defends its business practices

At Inman Join Las Vegas, July 30-Aug. 1 2024, the noise and misinformation can be banished, all of your huge questions can be answered, and the brand new enterprise alternatives that await can be revealed. Be a part of us.

In its first substantive response to explosive allegations that it has “corrupted” mortgage brokers by prohibiting them from sending enterprise to rivals, United Wholesale Mortgage (UWM) took to social media Tuesday to defend its enterprise practices and spotlight latest courtroom victories.

In similar posts on LinkedIn and X, the platform previously referred to as Twitter, UWM additionally promised to pay the lawyer charges of any enterprise companions who’re dragged right into a lawsuit related to what the lender characterised as “fraudulent claims” unleashed final week in a report funded by a hedge fund that’s taken a brief place in UWM.

The report by Hunterbrook Media alleges {that a} rising variety of mortgage brokers steer most or all of their enterprise to UWM, and is the premise of an April 2 lawsuit looking for class-action standing to signify debtors allegedly harmed by UWM’s practices.

On the coronary heart of the lawsuit is UWM’s controversial “All In” ultimatum, which, starting in March 2021, prohibited mortgage brokers who needed to proceed doing enterprise with UWM from sending mortgage functions to rivals Rocket Mortgage or Fairway Impartial Mortgage.

The lawsuit alleges that mortgage brokers who despatched greater than 75 p.c of their loans to UWM accounted for 48 p.c of the lender’s enterprise in 2023, up from 24 p.c in 2020, citing Hunterbrook Media’s evaluation of publicly accessible information.

UWM’s preliminary response to the report and lawsuit was to query the credibility of its supply — Hunterbrook Media, which has acknowledged that it’s funded by a hedge fund, Hunterbrook Capital — and to accuse Rocket Mortgage of being behind them.

Along with taking a brief place in UWM — a wager that the corporate’s share worth will decline — Hunterbrook Capital has bought shares in Rocket Mortgage’s guardian firm, Rocket Corporations.

Mat Ishbia

On April 4, UWM CEO Mat Ishbia informed reporters protecting the Phoenix Suns — the NBA group his household bought final yr — that the report was “Rocket Mortgage and Dan Gilbert doing Rocket Mortgage and Dan Gilbert issues. And that’s simply what it’s been funded by.”

This week UWM can be defending its enterprise practices, saying it’s “one hundred pc assured nothing wants to vary or will change due to Hunterbrook’s disinformation.”

In an announcement posted to each LinkedIn and X, UWM characterised the Hunterbrook report as an “assault” containing “quite a few lies, together with there being one thing incorrect with brokers selecting to ship most of their enterprise to a selected lender.”

“Mortgage brokers on common use three to 5 lenders and consider the varied wants of every borrower together with pace, service, fee and price/charges,” UWM mentioned. “It’s not unusual nor unlawful for a dealer to ship most or all of their enterprise to a selected lender. This isn’t distinctive to UWM brokers.”

UWM’s courtroom victories

UWM additionally pointed to victories in lawsuits associated to its All-In ultimatum, which the lender sought to implement in a February 2022 lawsuit in opposition to a mortgage dealer, America’s Moneyline Inc. (AML).

In its grievance, UWM accused the mortgage dealer of violating the phrases of its wholesale dealer settlement to not submit mortgage loans and mortgage mortgage functions to Rocket and Fairway.

In answering UWM’s grievance, AML made counterclaims in opposition to UWM together with fraud and misrepresentation. After most of AML’s counterclaim was dismissed in a Dec. 22, 2022 ruling, the corporate filed an amended counterclaim which was in the end dismissed lower than two weeks in the past, on March 29.

In dismissing AML’s counterclaim in opposition to UWM, Choose Laurie J. Michelson cited a report and proposals in a long-running lawsuit filed by one other mortgage dealer, The Okavage Group, which sued UWM in April 2021.

Not like AML, The Okavage Group had refused to signal UWM’s wholesale dealer settlement, which prohibits mortgage brokers from doing enterprise with Rocket and Fairway. As a substitute, it sued UWM on behalf of itself and different mortgage brokers who objected to the ultimatum, arguing that it amounted to anticompetitive conduct underneath federal and Florida antitrust legal guidelines.

In an amended grievance filed in August 2021, attorneys for The Okavage Group sought class motion certification, treble damages, attorneys’ charges and injunctive aid.

After a Justice of the Peace decide assigned to the case really useful that or not it’s dismissed in its entirety, the case dragged on, with attorneys for The Okavage Group submitting second and third amended class motion complaints in 2022 and 2023.

On Feb. 6, 2024, U.S. Justice of the Peace Choose Laura Lothman Lambert issued her second report recommending that The Okavage Group’s grievance be dismissed on all counts.

Though legal professionals for The Okavage Group claimed UWM’s ultimatum harmed shoppers by decreasing their entry to mortgages from Rocket and Fairway, their grievance supplied “no underlying info … that the ultimatum has elevated the prices of mortgage loans, nor does it specify whether or not the price of all mortgage loans have elevated, or solely these within the wholesale market,” Lambert wrote.

However the Justice of the Peace’s suggestion is just not binding, and the case has been reassigned to Choose Wendy W. Berger.

In a March 15 response, attorneys for Ishbia and UWM complained that, “After three years, 4 complaints, and two thorough reviews and proposals of the Justice of the Peace decide recommending dismissal, this matter ought to come to an finish.”

Though each circumstances may proceed to pull on in courts of attraction, UWM this week expressed confidence that the corporate is standing on strong authorized floor in mild of latest selections.

“Our rivals have been abusing the courtroom system since day one,” UWM mentioned on LinkedIn and X. “Again in 2021, many claimed UWM was doing one thing incorrect with the All-In initiative, asserting that it was in opposition to the regulation, antitrust guidelines have been damaged, and brokers shouldn’t work with UWM due to it. The play didn’t work then, and it gained’t work now.”

Hunterbrook’s brief place

Whereas UWM has now begun to deal with the specifics of the allegations detailed within the Hunterbrook Media report and associated lawsuit, it continues to lift questions on their supply.

UWM claims one of many authors of the Hunterbrook Media report “labored at a Rocket Mortgage affiliated dealer for the final 5 years and was actively engaged on this ‘report’ whereas employed there.”

One of many report’s authors, Matthew Termine, joined Hunterbrook Media as an investigative reporter in March after 5 years of employment at Morty, in line with his LinkedIn profile. A mortgage dealer market, Morty lists Rocket Mortgage as certainly one of greater than 25 lender companions on its web site.

UWM declined to touch upon whether or not Termine was the writer specified, and Hunterbrook Media had not responded to a request for remark by publication time Wednesday.

Certainly one of Hunterbrook Media’s founders, Sam Koppelman, took to social media final week to name Ishbia’s take that Rocket Mortgage is linked to Hunterbrook “a baseless conspiracy idea.”

However Hunterbrook Media is clear about its ties to Hunterbrook Capital, which raised the ire of UWM by not solely shorting its inventory, however taking an extended place in Rocket Corporations.

It stays to be seen whether or not Hunterbrook Capital’s bets repay.

Shares in UWM, which touched a brand new 52-week excessive of $7.75 on March 25, dipped to $5.86 on April 3, the day after Hunterbrook Media issued its report, however have since rebounded above $6.

Different publicly traded mortgage lenders have additionally seen their share costs take successful this month, as the most recent inflation information casts doubt on the prospects that the Federal Reserve will reduce rates of interest any time quickly. Mortgage lending quantity, notably refinancing, dwindled because the Fed raised charges to battle inflation in 2022 and 2023, and isn’t anticipated to rebound a lot this yr.

Shares in Rocket Corporations have been down 18 p.c Wednesday from a 2024 excessive of $15.01 registered on March 28.

At Wednesday’s closing worth of $6.26, shares in UWM have been down 19 p.c from their 2024 excessive.

Fairway Impartial Mortgage, which is privately held, introduced in March that it was closing down its wholesale mortgage division and shifting “to one hundred pc retail originations.”

The latest drop in UWM’s share worth presents a good entry level for buyers, BTIG analysts Eric Hagen and Jake Katsikas mentioned in an e mail to purchasers Monday.

In issuing a purchase suggestion with an $8 worth goal, BTIG analysts mentioned they suppose the premise of Hunterbrook Capital’s brief thesis — some debtors overpay for loans on account of brokers having the inducement to steer enterprise to UWM — “is misplaced.”

UWM’s income margins “don’t stand out like we’d anticipate if it was overcharging debtors, and the corporate brazenly and intentionally has loyalty incentives in place to assist higher-producing brokers,” Hagen and Katsikas wrote.

“Loyalty factors sometimes get utilized towards serving to the borrower purchase down their fee, in flip empowering the dealer to supply the perfect fee and win extra enterprise,” BTIG analysts mentioned. “The flexibleness we see for [UWM] to provide concessions and shut loans shortly is a operate of its scale, which is among the many principal components drawing us to the inventory.”

The “wholesome demand” to accumulate the mortgage servicing rights (MSRs) for loans UWM originates can be “a reinforcement for its product” and the corporate’s “total connectivity and contribution to the move of mortgage capital,” BTIG analysts mentioned.

Get Inman’s Mortgage Temporary Publication delivered proper to your inbox. A weekly roundup of all the most important information on the earth of mortgages and closings delivered each Wednesday. Click on right here to subscribe.

E-mail Matt Carter