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Veterans United Home Loans and its real estate brokerage affiliate are pushing back against an amended class-action lawsuit that accuses the companies of operating an illegal kickback scheme by misleading consumers about government affiliation and using “bait-and-switch” practices.
In a motion to dismiss that was filed Tuesday, the companies characterized the expanded lawsuit as a baseless copycat case driven by anonymous competitor complaints rather than actual consumer harm. The lender is seeking a dismissal with prejudice.
“This complaint is recycled from lawsuits filed against other large mortgage lenders, fueled by anonymous competitor remarks, and built on allegations that this complaint itself contradicts,” Chad Moller, corporate communications manager at Veterans United, told HousingWire. “As we have said from day one, these allegations are false.”
Hagens Berman, who represents the plaintiffs, did not immediately respond to a request for comment.
The lawsuit names Mortgage Research Center (doing business as Veterans United Home Loans) and Veterans United Realty (VUR), along with its marketing subsidiary Realty Search Solutions, as defendants. Veterans United employs roughly 4,500 people, while VUR operates a referral network of 5,000 agents, including more than 200 licensed in Missouri.
The plaintiffs allege the companies intentionally misled consumers into believing Veterans United is affiliated with the U.S. Department of Veterans Affairs (VA). They also claim the companies operate an illegal kickback scheme in which VUR provides leads to network real estate agents, who in turn pay the company about 35% of their commissions upon closing (roughly 1.05% of the home sale price) and steer buyers back to Veterans United for financing.
The amended complaint brings claims of Real Estate Settlement Procedures Act (RESPA) violations, unjust enrichment, and violations of consumer protection laws in Missouri, Illinois, New York, Ohio and Texas. Plaintiffs allege the “bait-and-switch” and misleading advertising tactics ultimately caused them to overpay for their mortgages.
‘No concrete injury’
In their motion to dismiss, the defendants argue the borrowers fail to allege a concrete and specific injury. According to the filing, each plaintiff uses identical boilerplate language to claim they “overpaid” without providing specifics on interest rates, fees or costs, nor do they allege they qualified for better terms from another VA lender.
“Rather than including allegations about Plaintiffs’ specific experience, the amended complaint contains 57 paragraphs of hearsay from ‘confidential’ real estate agents and loan officers who presumably compete with Defendants,” the motion states.
Addressing the “bait-and-switch” rate claims, the defense said just one named plaintiff, Scott Brickey, claims his rate suddenly increased at closing. The defendants argued Brickey failed to detail what he actually paid versus prevailing market rates or whether he qualified for better terms elsewhere, noting he received standard disclosures and was free to shop around for other lenders.
The companies denied claims of deceptive marketing regarding their VA relationship. Moller said that the plaintiffs’ attorneys unsuccessfully scoured the internet — including websites, social media, emails and brochures — when looking for instances of the companies holding themselves out as the VA.
“They could not find a single instance. That is because VUHL and VUR have never done so. Never,” he said.
RESPA defense
Regarding the RESPA claims, Veterans United argues the referral arrangement between VUR and its network agents falls within a safe harbor for “cooperative brokerage and referral arrangements between real estate agents and brokers.”
Even outside the safe harbor, the company said the borrowers failed to adequately plead the statutory requirements for RESPA liability, such as a “thing of value,” an “agreement or understanding,” or a “charge” paid by them. The possibility of future referrals, the lender argues, is too speculative.
The motion highlights that 13 of the 14 plaintiffs asserting RESPA claims do not allege they closed with an agent within the VUR network, thereby failing to connect the alleged scheme to their specific transactions. The lender also asserts that 11 of the 14 RESPA claims are time barred.
Additionally, the defendants took aim at the state consumer protection claims, arguing there was no deceptive conduct or actual damages. Claims in Missouri and Ohio exceed their respective five- and two-year statutes of limitations, the filing states, while claims in Texas failed to provide mandatory pre-suit notice.
