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Shares of United Wholesale Mortgage (UWM), the largest U.S. mortgage lender, rebounded on Wednesday following lurid allegations that more mortgage brokers were providing business to UWM, but Not finding the best deal for the client.
Pontiac, Miss.-based UWM denied the accusations released Tuesday by Hunterbrook Media LLC. Hunterbrook Media LLC is a newly formed company affiliated with a hedge fund holding a short position in UWM.
Hedge Fund, New York-based Hunter Brook Capitalalso held a long position in UWM’s biggest rival Rocket Companies Inc. and “raised $100 million to trade on reporters’ scoops,” Financial Times report.
To “short” UWM, Hunterbrook Capital borrowed shares of the company and sold them to investors hoping its value would increase. Hunterbrook Capital would profit only if UWM stock fell in value, allowing the fund to buy back the shares it borrowed at a lower price.
In being long Rocket Companies (the parent company of Rocket Mortgage), Hunterbrook Capital bought and held shares of the company in the hope that its value would increase. UWM will surpass Rocket Mortgage in 2022 to become the largest mortgage lender in the United States.
UWM calls the accusations against it unethical and potentially fraudulent.
“As you would expect, a hedge fund disguised as a news report deliberately misled the public, and the report itself was filled with inaccuracies and incorrect information,” UWM said in a statement to Inman. “Hedge funds using reporters to short stocks The scheme was not only unethical but potentially fraudulent.”
On March 25, UWM stock price just hit a 52-week high of $7.75. It fell to $5.86 on Wednesday, just two cents above the 2024 low of $5.82 hit on Feb. 28 when the company announced 2023 results. UWM share price The pair rebounded above $6 amid active trading.
Shares in Rocket Mortgage’s parent company rocket company It traded at $13.31 on Wednesday, down 11% from its 2024 high of $15.01 set on March 28.
Shares of many other public companies and broad indexes including the S&P 500 fell on Monday and Tuesday after higher-than-expected job growth and inflation data dampened expectations that the Federal Reserve could begin cutting interest rates in June.
Report sparks lawsuit on behalf of UWM borrowers
Hunterbrook Media previously stated make its report publicwhich provided the New York City-based law firm Boies Schiller Flexner with data analysis and research and the date of the release of the report.
Lawyers for Boies Schiller Flexner filed a complain A class-action lawsuit was sought Tuesday to represent borrowers allegedly harmed by UWM’s conduct.
The lawsuit alleges that UWM promoted mortgage brokers working with wholesale lenders “as the best way for borrowers to obtain the most affordable mortgages because, unlike the retail channel, borrowers in the wholesale channel are represented by ‘independent’ mortgage brokers and guidance, these brokers investigate options and shop for the most competitive prices and rates on their behalf.”
But the lawsuit alleges that UWM “corrupted mortgage brokers and defrauded hundreds of thousands of borrowers out of billions of dollars in excess fees and costs” to finance their homes.
In an effort to outpace Rocket, UWM issued a controversial “All In” ultimatum in 2021, asking mortgage brokers who wanted to do business with UWM not to send loan applications to competitors Rocket Mortgage or Fairway Independent Mortgage.
UWM CEO Matt Ishbia Bring to Facebook Announcing the move, it was claimed that Rocket and Fairway were attempting to poach mortgage broker customers through their direct and retail channels (Fairway announced last month The company is closing its wholesale mortgage division and “shifting the company’s business model to 100% retail origination”).
The ultimatum to mortgage brokers has previously resulted in UWM being embroiled in litigation with mortgage brokers as defendants and plaintiffs.
The new lawsuit, filed on behalf of consumers in the U.S. District Court for the Eastern District of Michigan, alleges that UWM’s “all-out” ultimatum led to more mortgage brokers “artificially directing loans to UWM.”
Mortgage brokers who sent 99% or more of their business to UWM last year accounted for 14% of the lender’s business, up from 4% in 2020, the lawsuit said, citing public data. The broker, which originates more than 75% of loans, said UWM’s business would account for 48% of the bank’s business by 2023, up from 24% in 2020.
The lawsuit also claims that lenders have been charging borrowers higher closing fees — an average of $865 above the median last year, compared to $211 in 2020.
In a statement provided to Inman, UWM called the lawsuit “a sham” and vowed to “defend these charges to the fullest extent of the law and work with thousands of independents who serve the unique needs of borrowers across the country.” Mortgage brokers stand together.” “
In the past, UWM has cited its ability to offer borrowers better deals as one of the reasons for its market share growth.
In the summer of 2022, UWM announced a “game on” pricing initiative that would reduce interest rates by 50 to 100 basis points (0.5 to 1 percentage point) on all loan types.
As profit margins shrank, UWM reported a net loss of $69.8 million in 2023, its first annual loss since going public in 2020. But UWM issued a record $93.9 billion in purchase loans, and the loss was driven largely by $854.1 million in asset writedowns. The value of the lender’s $300 billion mortgage servicing rights portfolio.
Hunterbrook’s approach differs from traditional journalism
A media company tied to a hedge fund published the accusation against UWM, which is reminiscent of the Citron Research report that plagued Zillow a decade ago.
Trading on non-public information often mined by journalists “may constitute securities fraud,” Financial Times the report said. Hunterbrook Media said its reports are only provided to its affiliate Hunterbrook Capital when they do not contain such “material non-public information” (MNPI).
“While our approach differs from traditional journalism in key ways – for example, by seeking to avoid inside sources – we are deeply inspired by the tools and value of fearless reporting and open source intelligence,” company says on its website.
While founders Nathaniel Horwitz and Sam Koppelman have “limited backgrounds in journalism or stock trading,” they have hired three full-time reporters and freelancers who write for traditional news outlets, and have included ProPublica founder Paul Steiger in Industry veterans within the company serve as advisors. Financial Times the report said.
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