UWM Cries Foul Over Class Action Lawsuit, But Critics See It As Theatrics

By JARED WHITLEY
Is this Mat Ishbia’s “Vlade Divac” moment?
Ishbia’s connections to basketball are well known, from his time on the 2000 Michigan State national championship team to his current “chaotic” ownership of the Phoenix Suns.
And Divac, the Los Angeles Lakers star center, was also well known for “flopping” – pretending to have been fouled in order to fool the refs.
Critics of United Wholesale Mortgage, a company notorious for its hardball tactics, see theatrics in its response to a class action lawsuit claiming Ishbia benefited when consumers overpaid for their loans from brokers who sent most of their business to his company. Ishbia is crying foul, his lawyers claiming that UWM is the victim of a lawsuit filed in bad faith.
Their theatrical move is to suggest a conspiracy between the hedge fund Hunterbrook Capital, its media arm Hunterbrook Media, and the Boies Schiller Flexner law firm that filed the class action suit.
According to the lawsuit, UWM allegedly offered brokers kickbacks in exchange for steering homebuyers to use only their lending services.
“The illicit scheme and enterprise go to the heart of the wholesale mortgage industry in America,” the suit reads. “By means of misrepresentations, deception, and unlawful inducements, UWM has infiltrated the fiduciary and agency relationship between class members and their hired mortgage brokers with the purpose, intent, and effect of corrupting brokers’ independence so that they intentionally funnel unsuspecting borrowers into UWM loans that are significantly more expensive than the available alternatives. As a result, UWM has moved billions of dollars from the pockets of borrowers across the country into its own.”
Based on data from the suit, the plaintiffs’ lawyers assert that the more a broker funneled loans to UWM, the more borrowers ended up overpaying. The suit includes an appendix listing more than 2,500 loan officers who, from 2021 to 2023, allegedly funneled over 75% of their loans to UWM: 270,693 loans worth more than $93 billion.
Ishbia’s attorneys say UWM is the victim of a “short-and-distort” scheme, an attempt to drive down the company’s stock to benefit investors.
But even neutral parties like attorney John Henson of Troutman Amin say the Hunterbrook report raised serious questions about UWM’s tactics. In particular, Henson wrote that the company may have violated the Real Estate Settlement Procedures Act (RESPA).
“Aside from any other problems the Hunterbrook article has exposed, the risk to both UWM and their brokers for RESPA violations is real,” said Henson, who is the former general counsel at ConsumerAffairs.com.
The key word in “independent mortgage” is independent, and customers who turn to them need to have confidence their brokers are presenting the best possible deals – not chasing commissions from a specific loan provider.
“It will be interesting to see how the lawsuit plays out, because it may be morally wrong, but the government will determine if it’s indeed illegal,” said David Sacco, lecturer of finance at the University of New Haven.
“I’m amazed more people don’t get scammed. We have more information than ever, but we’re all forced to sort out what’s real and what’s marketing.”
This was at the heart of the 2008 mortgage crisis, where the mortgage brokers acted in their own best interest rather than their clients’. Rule No. 1 of economics – people respond to incentives.
“I think it’s potentially very problematic if homebuyers were being steered into mortgages that carried a higher rate than others available to them by their mortgage brokers,” observed Ike Brannon, a former Treasury Department economist. “If that’s okay, it sort of defeats the entire profession of mortgage brokers.”
And much like those who fall victim to predatory high-credit interest rates, often “the people who are most desperate for financial services are the ones most targeted,” Sacco said.
“I’m the most anti-regulation guy in the world, but I’m surprised there isn’t more being done to keep this space more clean,” he said.
This isn’t the first time that UWM has been caught up in an accusation of strong-arming brokers.
Last month a judge in Florida dismissed a 2021 antitrust case filed against UWM by Okavage Group over the mortgage giant’s “All In” policy, demanding brokers sign an oath swearing off future work with competitors like Rocket Mortgage and Fairway Independent Mortgage Corporation.
Sacco says whatever the outcome in the courtroom, the best strategy for customers is to become better informed.
“The more information gets out, the more educated folks become, so they can hopefully make better decisions,” Sacco concluded.