Mortgage lender United Wholesale sued by consumers alleging billions in excess fees

UWM Holdings

03/04/2024 20:25

By Mike Scarcella
       April 3 (Reuters) - United Wholesale Mortgage was hit
with a proposed consumer class action on Tuesday in U.S. court
accusing it of scheming with brokers to push home-buyers into
expensive mortgages, costing them billions of dollars in excess
fees.
    Four residents of North Carolina, Florida and Tennessee
filed the lawsuit in federal court in Detroit against  UWM
Holdings  UWMC.N  and related entities, including United
Wholesale.
    The lawsuit alleged that UWM engaged in a mortgage loan
“steering enterprise” with "captive" brokers in violation of
federal racketeering laws and other provisions. The complaint
said hundreds of thousands of mortgage loans are at issue
nationwide.
    Pontiac, Michigan-based United Wholesale, which bills itself
as the country’s largest home mortgage lender, on Wednesday in a
statement called the lawsuit a "sham" and said it will "defend
these allegations to the fullest extent permitted by law."
        Details of the alleged mortgage-lending fraud scheme
were first published on Tuesday by startup Hunterbrook Media,
which is affiliated with the hedge fund Hunterbrook Capital. The
media outlet said Hunterbrook Foundation shared data analysis
and research with Boies Schiller Flexner, the firm that filed
the lawsuit.
  
    Wholesale lenders don’t interact directly with prospective
borrowers but instead use a network of mortgage brokers, who in
turn engage with home buyers. The mortgage industry’s other
channel is retail-focused, where a buyer works with a loan
officer at a financial institution. No brokers were named as
defendants.
    Mortgage brokers in the wholesale arena are supposed to be
independent and shop around to offer would-be borrowers a range
of options, the consumers’ lawsuit said.
    United Wholesale, according to the complaint, “corrupted a
large swath of ‘independent’ brokers” — using them essentially
as employees who could steer borrowers to United Wholesale
mortgages that were not in the best interest of the consumer.
    United Wholesale, according to the lawsuit, “misrepresented
and concealed the relationship between itself and brokers.”
    The lawsuit said that as early as 2020 "an already high
proportion of mortgage brokers in UWM’s network were steering
most of their loans to UWM."
    United Wholesale issued $39 billion in mortgages over the
last three years through thousands of brokers who referred “99%
of their business to UWM,” the lawsuit said.
    United Wholesale imposes an “onerous and restrictive”
agreement on brokers with whom the company works, according to
the consumers’ lawsuit. The agreements, the lawsuit alleged,
prevented brokers from presenting clients with the best mortgage
deal, the lawsuit said.
    
    The case is Therisa Escue et al v. United Wholesale Mortgage
LLC et al, U.S. District Court, Eastern District of Michigan,
2:24-cv-10853-PDB-DRG.
    For plaintiffs: John Zach, Tyler Ulrich and Mark Mao of
Boies Schiller Flexner, and Brandon Hubbard of Dickinson Wright
    For defendants: No appearances yet

 (Reporting by Mike Scarcella)
 ((Mike.Scarcella@thomsonreuters.com;))