UWM Submits Second Motion To Dismiss In Class Action Lawsuit
By KIMBERLEY HAAS
Lawyers for United Wholesale Mortgage have again moved to dismiss a class action lawsuit alleging that consumers were duped into overpaying for their loans by brokers who sent most of their business to the lender.
They say the lawsuit reflects an unprecedented effort to smear UWM, its affiliates, and CEO Mat Ishbia in “an obvious coordinated attempt to benefit market speculators.”
The initial complaint, filed by Boies Schiller Flexner LLP on April 2, alleged that UWM participated in a pattern of racketeering activity by conspiring with brokers to withhold information from homebuyers while misrepresenting material facts to get these consumers to use the mortgage giant while financing their properties.
It was submitted on the same day as a report released by Hunterbrook Media linked UWM to $39 billion in mortgages sent to the lender by brokers who allegedly worked as loyalists.
Hunterbrook Media disclosed that Hunterbrook Capital shorted UWM and took a long position on Rocket Companies stock as part of the report. Hunterbrook Capital makes trades based on stories it uncovers through Hunterbrook Media.
UWM lawyers say the claims against them are meritless, and in a brief filed on Oct. 15, they argued that the court should dismiss the lawsuit with prejudice.
“The court should put an end to this coordinated effort to tarnish UWM’s reputation, grant defendants’ motion, and dismiss this action without further leave to amend,” they wrote.
In arguing against the racketeering claim, UWM’s lawyers said the plaintiffs must show the existence of an enterprise that engaged in a pattern of racketeering activity. They must also plead facts showing UWM was the proximate cause of their injuries.
“Plaintiffs miss all of those marks,” they wrote. “And the facts actually alleged make clear that the causal chain is much too indirect – and involves far too many intervening, third-party actions – to support a RICO claim.”
“Although plaintiffs identify specific statements by UWM and Ishbia, they never allege with the requisite specificity required by law that plaintiffs – or anyone else – heard or relied upon those specific statements.”
The lawyers said brokers are independent businesses that have their own incentives to work with UWM. They pointed out that tens of thousands of brokers and loan officers originate loans with UWM each year.
The number of brokers who steered loans to the company is a basis of the class action suit. According to the allegations, 8,665 loan officers at mortgage brokers sent the lender more than 99% of their mortgages, worth at least $11.7 billion.
Critics of UWM say the lender’s responses to the lawsuit, including the argument that it was filed in bad faith, are theatrics coming from a company known for hardball tactics.
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.
“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 worked at LendingTree for six years.
UWM argues that the plaintiffs’ RESPA claims in the class action suit fail because they cannot show their brokers received a kickback for referring business to the lender.