United Wholesale Mortgage Faces Class Action Alleging Mortgage Scheme with Brokers
A proposed consumer class action has been filed against United Wholesale Mortgage (UWM) in a U.S. court, accusing the company of colluding with brokers to steer home-buyers into costly mortgages, leading to billions of dollars in excess fees.
The lawsuit, brought forth by four residents from North Carolina, Florida, and Tennessee, was filed in federal court in Detroit against UWM Holdings and related entities, including United Wholesale.
Allegations in the lawsuit claim that UWM participated in a mortgage loan “steering enterprise” with “captive” brokers, violating federal racketeering laws and other regulations. The complaint suggests that hundreds of thousands of mortgage loans across the nation are implicated.
Based in Pontiac, Michigan, United Wholesale is recognized as the largest home mortgage lender in the country. In response to the lawsuit, the company issued a statement on Wednesday denouncing the allegations as a “sham” and vowed to vigorously defend against them within the boundaries of the law.
Details of the purported mortgage-lending fraud scheme were initially reported by startup Hunterbrook Media, affiliated with hedge fund Hunterbrook Capital. Hunterbrook Media claimed that data analysis and research were shared with Boies Schiller Flexner, the legal firm representing the plaintiffs in the lawsuit.
Unlike retail channels where buyers work directly with loan officers, wholesale lenders like United Wholesale rely on a network of mortgage brokers who engage with home buyers. The lawsuit contends that mortgage brokers in the wholesale arena are expected to be independent and offer borrowers various options. However, the complaint accuses UWM of manipulating “independent” brokers, effectively steering borrowers towards UWM mortgages that may not be in their best interest.
The lawsuit alleges that UWM misrepresented and concealed its relationship with brokers, leading to an imbalanced distribution of loans. As early as 2020, a significant proportion of mortgage brokers in UWM’s network were allegedly directing most of their loans to UWM.
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Over the past three years, United Wholesale has issued $39 billion in mortgages through thousands of brokers, with the lawsuit claiming that 99% of these brokers channeled their business to UWM.
The consumers’ lawsuit further accuses United Wholesale of imposing stringent agreements on brokers, preventing them from offering clients the best mortgage deals. These agreements, according to the lawsuit, have restricted brokers’ ability to act independently in the best interests of borrowers.
