UWM and Mat Ishbia hit with class action lawsuit

Lawsuit and investigation alleges UWM's broker tactics led to excessive fees

UWM and Mat Ishbia hit with class action lawsuit
A bombshell class action lawsuit has been filed against United Wholesale Mortgage (UWM) and its CEO Mat Ishbia (pictured), accusing the company of a far-reaching scheme to cheat borrowers. UWM has labeled the lawsuit “a sham”.

Plaintiffs Therisa Escue, Billy Escue, Kim Schelbe, and Brian Weatherill – representing themselves and other similarly affected borrowers – claim UWM violated federal laws, including the RICO Act, by corrupting independent mortgage brokers to prioritize UWM’s interests over those of their clients.

They demand that UWM be held accountable for its alleged misconduct, stating that UWM orchestrated and executed a “deliberate scheme, in coordination with a host of corrupted mortgage brokers, to cheat hundreds of thousands of borrowers out of billions of dollars in excess fees and costs that they paid to finance their homes.”

Unlike loan officers at retail lenders, brokers are meant to serve as neutral middlemen, finding the most competitive loan terms for their clients from various lenders. 

However, the plaintiffs contend that UWM, a dominant force in the wholesale mortgage market, has corrupted this system through coercive tactics and fraudulent practices.

For its part, UWM has promised to defend these allegations to “the fullest extent” and noted that it “stands with” independent mortgage brokers.

UWM’s alleged pressure tactics

In 2021, UWM issued an ultimatum demanding brokers choose between them and competitors like Rocket Pro TPO and Fairway Independent Mortgage. It was alleged that UWM used its market power to pressure over 8,000 brokers to send their business to UWM, totaling at least $11.7 billion – regardless of whether it offered the best terms for borrowers.

Data cited in the lawsuit shows that nearly half of all UWM mortgages originate from brokers who send 75% or more of their business to UWM.  Over the past three years, UWM has issued nearly $39 billion in mortgages via brokers who refer 99% of their business to UWM.

Since the ultimatum, numerous legal disputes have arisen over brokers allegedly breaking the agreement, facing penalties of $5,000 per loan closed with UWM or $50,000, whichever is greater.

Read more: Rocket Pro’s Niemec hits out at UWM

Boies Schiller Flexner, a law firm representing the plaintiffs, argued that UWM’s actions have had devastating consequences for borrowers, resulting in billions of dollars in excess fees and costs.

“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,” John Zach, partner at Boies Schiller Flexner, told MPA in an emailed statement.

The complaint disputes CEO Mat Ishbia’s public statements asserting that UWM’s broker partners are “completely independent.”

“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,” Zach added.

The plaintiffs claim that UWM’s alleged scheme caused borrowers to pay substantially higher fees than they should have, costing them billions of dollars collectively. They are seeking damages in an amount to be determined at trial.

Hunterbrook investigation fuels lawsuit

The lawsuit’s timing coincides with the release of an investigative article by Hunterbrook Media. The media firm published a detailed exposé revealing allegations similar to those in the suit.

“Hunterbrook Foundation shared research with Boies Schiller Flexner — and we hope homeowners have a path to restitution for what our data analysis indicates could be substantial damages,” said Sam Koppelman, publisher at Hunterbrook Media.

UWM has issued a statement calling the lawsuit “a sham,” alleging it is orchestrated by Hunterbrook. The mortgage giant accuses Hunterbrook of attempting to manipulate the stock market and denies any wrongdoing. 

“Although the real party behind it is a hedge fund named Hunterbrook, the lawyers concealed the hedge fund’s involvement,” UWM told National Mortgage Professional. “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.

“UWM will defend these allegations to the fullest extent permitted by law and stands with the thousands of independent mortgage brokers who serve the unique needs of borrowers across the country.”

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