By KIMBERLEY HAAS
A United States district court judge in Michigan has granted in part United Wholesale Mortgage’s motion to dismiss complaints in an ultimatum lawsuit filed by America’s Moneyline.
According to court documents, on Dec. 22 Judge Laurie Michelson dismissed fraud and promissory estoppel claims, as well as all but one declaratory-judgment subclaim.
Lawyers for America’s Moneyline say that in 2021 leaders at United Wholesale Mortgage issued an ultimatum that forced a number of mortgage brokers, including their client, to choose between doing business with UWM and two of their competitors.
AML leaders, relying on alleged promises that UWM would not enforce the ultimatum against it, continued to do business with both UWM and Rocket Pro.
After UWM sued for breach of their amended wholesale banker agreement, AML countersued alleging the assurances they received were fraudulently made, promissory estoppel should apply to enforce those assurances, and the ultimatum is invalid and unenforceable.
“Believing the counterclaims to be without merit, UWM moved to dismiss them. The court agrees and will grant UWM’s motion in large part. However, one declaratory-judgment subclaim will survive,” Michelson wrote.
The decision by UWM CEO Mat Ishbia to enforce these ultimatum agreements has caused disruption in the industry.
In February, Jason Vondrak of Prospect Home Finance announced he laid off 50 employees from his California-based company, and he laid the blame at the feet of Ishbia.
This fall, Rocket Pro TPO’s then executive vice president turned heads with an opinion piece claiming UWM represents a massive threat to America’s mortgage brokers and their future independence.
In the piece called “America’s Mortgage Brokers Face an Unprecedented Threat to their Independence,” Austin Niemiec said leaders at UWM have reduced broker optionality by contractually forcing their brokers to choose between Rocket Mortgage and UWM, enforcing that same ultimatum contract to eliminate a UWM broker from brokering to Fairway Independent Mortgage, and engaging in a price war to eliminate the competition.
“If Mat Ishbia and UWM were truly committed to the real kind of competition that benefits brokers and their clients, he wouldn’t use his lawyers to take away brokers’ options, and he wouldn’t celebrate the demise of other wholesale lenders…. which only further reduces broker choice,” Niemiec wrote.
Niemiec, who is now chief revenue officer at Rocket Mortgage, sat down with The Mortgage Note at the time for a one-on-one interview. This is what he had to say:
“I think that the biggest threat if we’re talking about the mortgage broker community is what we’re seeing UWM and Mat Ishbia doing, and you’re starting to see a lot of chatter and a lot of folks really waking up to what’s going on.
A mortgage broker’s superpower is choice and optionality. Consumers go to brokers because they have access to all sorts of lenders, and these lenders are competing for their business. And so, they have choice and optionality and, of course, a fiduciary responsibility to find the best loan for the consumer.
UWM and Mat Ishbia claim to be a champion of the mortgage broker model. But if you look at their actions over the last two years, it’s really the opposite.
What I mean by that is they’re really doing everything they can to take away those options, to take away those choices, for mortgage brokers. And those choices are their superpower as a broker. A broker’s not a broker without a lot of great, strong choices.”
UWM and Rocket compete heavily for business.
In November, leaders at UWM announced they had surpassed Rocket Mortgage to become the number one wholesale and purchase lender in America after the companies announced financial results for Q3 2022.
“This isn’t just about UWM, it’s about the entire mortgage broker channel. Together, independent mortgage brokers and UWM are #1, and we’ve never had more momentum than we do right now. The wholesale channel is better for consumers and loan originators, and there’s huge room for opportunity and growth going forward. We’ll never relax. We’re going to continue educating borrowers, real estate agents, and loan officers on the benefits of the wholesale channel and make sure they know it’s the best place for consumers to get a loan,” Ishbia said in a statement.
Ishbia said that on average, independent mortgage brokers save borrowers over $9,400 over the life of the loan and over $10,400 for minority borrowers.
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