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United Wholesale Mortgage (UWM) took to social media on Tuesday to defend its business practices and highlight its recent court victory over what it described as “corruption” by banning mortgage brokers from doing business with competitors. The first substantive response to the explosive accusations.
in the same post LinkedIn and XUWM, the platform formerly known as Twitter, has also pledged to pay attorneys’ fees to any business partners involved in lawsuits related to what the lender called “fraudulent claims” in a report last week funded by a hedge fund. Short position in UWM.
this Report Hunterbrook Media claims that an increasing number of mortgage brokers are switching most or all of their business to UWM, which is the basis for a lawsuit filed on April 2 that seeks class action status to represent those allegedly affected by UWM’s conduct. Harmed borrowers.
At the center of the lawsuit is UWM’s controversial “all-in” ultimatum, which barred mortgage brokers who wanted to continue doing business with UWM starting in March 2021 from sending loan applications to competitors Rocket Mortgage or Fairway Independent Mortgage .
this lawsuit alleges Mortgage brokers, who originate more than 75% of UWM’s loans, will account for 48% of the lender’s business by 2023, up from 24% in 2020, according to a Hunterbrook Media analysis of public data.
UWM’s initial response to the report and lawsuit was to question the credibility of its source — Hunterbrook Media, which admitted it was funded by hedge fund Hunterbrook Capital — and accuse Rocket Mortgage of being behind them.
In addition to holding a short position in UWM, betting that the company’s stock price would fall, Hunterbrook Capital also bought stock in Rocket Mortgage’s parent company, Rocket Companies.
Matt Ishbia
On April 4, UWM CEO Mat Ishbia tell reporters Reports on the Phoenix Suns, the NBA team his family purchased last year, read, “Rocket Mortgage and Dan Gilbert are doing Rocket Mortgage and Dan Gilbert things. That’s exactly how it’s funded.”
UWM also defended its business practices this week, saying it is “100 percent confident that nothing needs to change and will not change as a result of Hunter Brooke’s disinformation.”
In statements posted on LinkedIn and
“Mortgage brokers use an average of three to five lenders and evaluate each borrower’s various needs, including speed, service, interest rates and costs/fees,” UWM said. “Brokers transfer most or all of their business to Giving to a specific lender is not unusual, nor is it illegal. This is not unique to UWM brokers.”
UWM’s court victory
UWM also noted a victory in a lawsuit related to its All-In ultimatum, which the lender sought to enforce in a February 2022 lawsuit against mortgage broker America’s Moneyline Inc. (AML).
In its complainUWM alleges the mortgage broker violated the terms of its wholesale broker agreement by failing to submit mortgages and mortgage loan applications to Rocket and Fairway.
In response to UWM’s complaint, AML stated Counterclaim against UWM including fraud and misrepresentation.After most of AML’s counterclaims were dismissed Ruling on December 22, 2022the company submitted a Amended Counterclaim ultimately it is fired Less than two weeks ago, on March 29th.
In dismissing AML’s counterclaim against UWM, Judge Laurie J. Michelson cited reports and recommendations from a long-running lawsuit filed in April 2021 by another mortgage broker, The Okavage Group, against UWM.
Unlike AML, The Okavage Group refused to sign UWM’s wholesale broker agreement, which prohibits mortgage brokers from doing business with Rocket and Fairway. Instead, it sued UWM on behalf of itself and other mortgage brokers who opposed the ultimatum, arguing that it amounted to anticompetitive conduct under federal and Florida antitrust laws.
in a Amended complaint Attorneys for The Okavage Group filed the lawsuit in August 2021, seeking class action certification, treble damages, attorneys’ fees and injunctive relief.
After a magistrate was assigned to hear the case respected But the case dragged on, and lawyers for The Okavage Group filed a second lawsuit and asked that it be dismissed altogether. third revision Class Action Complaints for 2022 and 2023.
On February 6, 2024, United States Magistrate Judge Laura Lothman Lambert issued second report It is recommended that all charges brought by the Okawachi Group be dismissed.
Although attorneys for The Okavage Group claimed that UWM’s ultimatum harmed consumers by reducing their access to mortgage loans from Rocket and Fairway, their complaint “fails to provide the basic facts…the ultimatum increased mortgage lending cost, and did not specify whether all costs increased.” Mortgage lending increased, or just lending in the wholesale market,” Lambert wrote.
But the magistrate’s recommendation is not binding and the case has been reassigned to Judge Wendy W. Berger.
in a Reply March 15lawyers for Ishbia and UWM complained that “after four complaints over three years, and two exhaustive reports and recommendations from the magistrate recommending dismissal, this matter should be closed.”
While both cases are likely to continue to drag on in the appeals courts, UWM said this week it had a solid legal case given the recent rulings.
“Our competitors have been abusing the court system from day one,” UWM said on LinkedIn and Legal and antitrust rules.” have been broken, so brokers should not cooperate with UWM. The play didn’t work then, and it doesn’t work now. “
Hunter Brook’s Short Position
While UWM has now begun to address the specifics of the allegations detailed in the Hunterbrook Media report and related lawsuits, questions continue to arise about their origins.
UWM claims one of the authors of the Hunterbrook Media report “has worked for a Rocket Mortgage affiliated broker for the past five years and was actively working on this ‘report’ while employed.”
Matthew Termine, one of the report’s authors, said he joined Hunterbrook Media as an investigative reporter in March after working at Moty for five years. LinkedIn profile. Morty, a mortgage brokerage marketplace, lists Rocket Mortgage as one of its more than 25 lender partners website.
UWM declined to comment on whether Termine was the named author, and Hunterbrook Media had not responded to a request for comment as of publication time Wednesday.
Hunterbrook Media co-founder Sam Koppelman took to social media last week to call Ishbia’s suggestion that Rocket Mortgage was linked to Hunterbrook a “baseless conspiracy theory.”
But Hunterbrook Media was transparent about its relationship with Hunterbrook Capital, not only shorting its stock but also taking a long position in Rocket Companies, which drew the ire of UWM.
It remains to be seen whether Hunter Brook Capital’s bet pays off.
UWM StockHitting a new 52-week high of $7.75 on March 25, it fell to $5.86 on April 3, the day after Hunterbrook Media released its report, but has since rebounded to over $6.
Shares of other publicly traded mortgage lenders have also been hit this month as the latest inflation data cast doubt on the prospect of the Federal Reserve cutting interest rates soon. As the Federal Reserve raises interest rates in 2022 and 2023 to combat inflation, mortgage volume (especially refinancing volume) has decreased and is not expected to rebound significantly this year.
shares rocket company On Wednesday, the price was down 18% from the 2024 high of $15.01 set on March 28.
As of Wednesday’s closing price of $6.26, UWM stock was down 19% from its 2024 high.
Fairway Independent Mortgage is privately held; Announced in March The company will close its wholesale mortgage division and “move to 100% retail.”
BTIG analysts Eric Hagen and Jake Katsikas said in an email to clients on Monday that the recent decline in UWM shares provides investors with a favorable entry point.
In issuing a buy recommendation with an $8 price target, BTIG analysts said they believe the premise of Hunterbrook Capital’s short thesis – that some borrowers are overpaying for loans because brokers have an incentive to direct business to UWM – “is Incorrect”.
Hagen and Katsikas wrote that if UWM charges borrowers too much, its revenue margins “will not be as outstanding as we expected, and the company openly and intentionally creates loyalty incentives to support high-producing brokers.” .
“Loyalty points are often used to help borrowers get lower interest rates, allowing brokers to offer the best rates and win more business,” BTIG analysts said. “We see (UWM’s) flexibility in offering great deals and closing loans quickly. Sex is a function of its size, which is one of the main factors that attracted us to the stock.”
Analysts at BTIG said “healthy demand” for UWM’s mortgage servicing rights (MSRs) is also “a reinforcement of its product offering” and the company’s “overall connectivity and contribution to mortgage capital flows”.
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