Boies Schiller law firm denies hedge fund collusion in home buyer class action.
- New York based law firm Boies Schiller denies hedge fund collusion in home buyer class action.
-
UWM sued over ‘corrupt’ scheme with brokers to steer loans.
- Company denies allegations and calls the class-action-seeking lawsuit a ‘sham’.
United Wholesale Mortgage (UWM), a leading mortgage lender in the United States, is facing a class-action lawsuit that alleges the company conspired with mortgage brokers to impose excessive fees and costs on borrowers. UWM has dismissed these allegations as a “sham.”
The lawsuit was initiated back in April 2024, in a district court in Michigan by plaintiffs Therisa D. Escue, Billy R. Escue, Kim Schelble, and Brian P. Weatherill.
The complaint targets UWM, its parent company UWM Holdings Corp., its president and CEO Mat Ishbia, as well as his holding company, SFS Holding Corp. The plaintiffs assert that they engaged independent mortgage brokers under the impression that the wholesale channel would provide the most cost-effective mortgage options, as these brokers can compare various offers—contrasting with loan officers who work for retail lenders.
John Zach, an attorney representing the plaintiffs, stated, “As alleged in our filing, UWM has systematically and intentionally corrupted the wholesale mortgage channel through fraudulent practices to line its own pockets and those of its senior executives, including Mr. Ishbia, at the expense of everyday Americans.” He further emphasized, “Homebuyers are legally and morally entitled to receive honest, unconflicted assistance from the brokers they hire to help them secure the lowest prices for a loan. UWM turns this process on its head by corrupting brokers and tricking homebuyers into paying billions of dollars more in costs and fees.” In response to the allegations, a UWM spokesperson claimed that the lawsuit is primarily driven by a hedge fund named Hunterbrook, asserting that “lawyers concealed the hedge fund’s involvement.”
Boies Schiller law firm denies hedge fund collusion in the home buyer class action.
Earlier this year a spokesperson for UWM said; “Hunterbrook’s business model is to sensationalize public information to manipulate the stock market, thereby enriching their wealthy funders at the expense of regular investors, many of whom are hard-working UWM employees,” the spokesperson said.
“UWM will defend these allegations to the fullest extent permitted by law and stand with the thousands of independent mortgage brokers who serve the unique needs of borrowers across the country.”
Related: Blue Cross Blue Shield settles $2.8 billion US health provider class action
The legal action arises from a report released earlier this year by Hunterbrook Media, which alleges that UWM exerts pressure on brokers to direct loans to them. According to an analysis of millions of federal and state records, the report reveals that in 2023, 8,682 loan officers from independent brokerages channeled over 99% of their mortgages to UWM, amounting to a minimum of $11.7 billion.
This figure represents more than a twofold increase compared to the 3,831 brokers who directed at least 99% of their business to UWM in 2020. Hunterbrook Media is associated with the hedge fund Hunterbrook Capital, which took a short position on UWM shares following the publication of the report. The Financial Times noted that the fund secured $100 million in investments based on the information provided by the outlet. On Wednesday, UWM's stock closed at $6.10 per share, reflecting a 1.67% increase after a decline the previous day in the wake of the report.
The lawsuit asserts that instead of functioning independently, "corrupted brokers are, in essence, employees in the UWM enterprise." The basis for this claim is found within UWM’s Wholesale Broker Agreement.
One of the key elements cited is the “All-In” initiative, which forbids any broker engaged with UWM from seeking offers from competitors such as Rocket Mortgage and Fairway Independent Mortgage Corp.
In February, a federal judge ruled that a lawsuit initiated by the Florida-based Okavage Group in April 2021 should be dismissed. A similar ruling was made last month by another judge, who partially dismissed a case brought by America’s Moneyline. According to the lawsuit filed this week, the second mechanism designed to ensure broker loyalty is the imposition of a restrictive “Lock-In” policy.
This policy obligates brokers to refrain from shopping around after a loan has been locked, a process that typically occurs at the outset of the loan procedure in the mortgage industry.
Related: Wu-Tang Album Martin Shkreli Must Testify in Court
