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Broker lawsuit targets UWM’s ultimatum

Florida broker seeks class-action status in suit over wholesaler's Rocket/Fairway ultimatum

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The controversial ultimatum United Wholesale Mortgage (UWM) issued to brokers in March constituted a violation of the Sherman Act and a series of anti-competition laws in the state of Florida, a St. Augustine-based mortgage broker alleges in a new lawsuit that seeks class-action status.

Dan O’Kavage, president and founder of the O’Kavage Group, is the lead plaintiff in a lawsuit that claims UWM’s gambit was anticompetitive and illegal.

“I am fighting back against UWM because my freedom and independence, the reason my clients choose to work with me, has been stripped away,” O’Kavage said in a statement. “If I didn’t want to operate in an independent fashion, I would work on the retail side of the industry and work in-shop for one of the major lenders. That was never something I considered nor wanted to do. I like being local. I like supporting my neighbors and community. UWM is stripping my freedom to be the best loan officer for my clients.”

On March 4, UWM CEO Mat Ishbia announced on Facebook Live that mortgage brokers who did business with Rocket Mortgage or Fairway Independent Mortgage could not also send loans to UWM as of March 15. Any broker who did would face fines upwards of $50,000 a month. Ishbia told HousingWire at the time that Rocket and Fairway were undermining the wholesale channel, and the wholesale lender’s decision was based on a need to protect mortgage brokers from bad actors.

“If you work with them, can’t work with UWM anymore, effective immediately,” Ishbia said. “I can’t stop you, but I’m not going to help you, help the people that are hurting the broker channel, and that’s what’s going on right now.

“We don’t need to fund Fairway Independent or Rocket Mortgage to try to put brokers out of business. We don’t need to do that. If you want to do that as your own deal, no hard feelings, but you can’t work with UWM anymore,” he said.

Others saw a more cynical strategy at play – UWM’s stock was sputtering, and Rocket, easily the top retail lender in America, was gaining market share in the wholesale channel that UWM dominates. If ever there was a time to hobble a heavily capitalized rival encroaching on your territory, that was it.

Dozens of brokers who talked to HousingWire in March expressed unease or outright anger about being forced to choose a side. Several said the ultimatum cut at the identity of a mortgage broker – being able to offer consumers the greatest range of mortgage options was central to their mission.

“If I get an ultimatum from UWM, I will stay at UWM just because they do everything to make sure I don’t lose my client base,” one West Coast broker told HousingWire in March. “And that is worth a lot more than the processing help from Quicken on the .125% better pricing. However, I don’t like that I am being forced to choose. I think that’s wrong. I don’t think UWM should tell me where to send my loans. The bottom line is that it is the brokers responsibility to keep their client base and to make sure we stay relevant and profitable. My business does not depend on Mat Ishibia’s marketing plan.”

The class-action-seeking lawsuit, filed in the state of Florida, argues that the ultimatum undermined brokers’ ability to choose the best programs for their clients, creating harm and potentially higher costs to borrowers. It claims UWM has “willfully violated numerous federal and Florida laws and regulations,” including the Sherman Antitrust Act, the Florida Antitrust Act, the Tortious Interference with Business Relationships and Florida’s Deceptive and Unfair Trade Practices Act. O’Kavage’s suit also alleges that brokers were forced into an unenforceable contract. 

“The actions by United Wholesale Mortgage are not only entirely unethical, and the behavior demonstrated by a schoolyard bully, but also incredibly ill-conceived,” said Robert Goodman, partner at Parrish & Goodman. “There is no room in our economy, or our society, for large market participants to conjure up schemes to weaken competition. Courts have long held this behavior to be unlawful, and we are confident they will again in this matter with United  Wholesale Mortgage.”

In response, a spokesperson for the wholesale lender said that “UWM is committed to and focused on the growth and success of over 10,000 independent mortgage brokers across America who chose to be All In for the broker channel. We are not focused on the roughly 600 who declined to move forward as a partner. We do not comment on legal matters that are currently pending, especially those that have no merit or substance.”

In past interviews with HousingWire, however, Ishbia has said that he is confident the ultimatum was completely legal. The company has also maintained that lenders still have 70-plus other lenders they can work with and no other lenders would be added to the list.

As of late March, approximately 600 of the 3,000 mortgage brokers affected by the ultimatum elected not to sign UWM’s addendum.

In an interview, Goodman said that “dozens” of other mortgage brokers have agreed to be plaintiffs in the case but didn’t want to be named.

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