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Politics & MoneyMortgage

UWM sues broker shop for sending loans to Rocket, Fairway

America's MoneyLine says UWM's tactic is "anticompetitive," "anti-American" and tyrannical

United Wholesale Mortgage (UWM) is making good on its threat to take legal action against partnering broker shops that also send business to Rocket Mortgage and Fairway Independent Mortgage, a violation of the wholesaler’s controversial broker agreement.

UWM filed a lawsuit in Michigan federal court late Thursday that claims America’s MoneyLine, a high-volume mortgage brokerage based in Southern California, owes it $2.8 million for repeatedly violating the terms of the agreement. The broker agreement was modified just under a year ago to prevent broker shops from doing business with Rocket and Fairway, an initiative UWM dubbed “All-In.”

In March 2021, 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 so would face fines upwards of $5,000 per loan or $50,000, whichever violation sum was greater. 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.

Critics, meanwhile, argued it wasn’t high-minded in the least. It was no more than a brazen attempt to kneecap competitors, they said. (Rocket and Fairway, however, both said UWM’s strategy ended up generating an uptick in wholesale business for them.)

The lawsuit claims that since signing the “All-In” addendum, America’s MoneyLine has submitted at least 560 mortgage loans to Rocket and Fairway. It goes on to say that if America’s MoneyLine — which is licensed in 20 states and originated $1 billion over the last two years — wanted to do business with the two lenders, they could have done so, but only after terminating the agreement with UWM. Ishbia said UWM had a conversation with America’s MoneyLine about violating the agreement before the lawsuit was filed.

Shawn John Nevin, the CEO of Orange County-based AML, declined to comment. However, in a statement he provided HousingWire Friday afternoon, he described UWM’s move as “anticompetitive, anti-American” and said it won’t survive judicial scrutiny.

“We will outline and prove in court how we were misled by ongoing assurances of nonenforcement of this non-American antitrust provision,” he wrote. “We have lost and will continue to lose millions of dollars because of these unfounded tactics, of which we will pursue. Moreover, the broker community will get a glimpse into UWM’s true goal of seeking to control independent brokers to such an extent that they ultimately become effective arms of UWM; something we simply cannot and will not agree to do. This is why we are brokers — to have the right of choice. As independent brokers we need to be able to shop for the best terms and best programs for our clients, the American people.”

Nevin also said that “many brokers” are using both Rocket and UWM “without incident” but his firm is being made an example of.

In an interview with HousingWire, Ishbia, whose firm controls about one-third of the wholesale market, said that they discovered that a “handful” of brokers who signed the addendum were also sending loans to Rocket and/or Fairway.

“What we found was a couple had like two loans or four loans,” he said. “This company had hundreds of loans. And so this was the only one that was substantial enough…it was a large company that signed a contract, agreed to the terms of a contract and disregarded it.”

Ishbia added that any broker firm found to be violating the amended broker agreement could face legal consequences.

Nearly a year after the ultimatum was issued, Ishbia calls it an unqualified success. More than 11,500 brokers signed the agreement, and some top brokers who initially didn’t sign have since done so, he said. UWM’s origination volumes have steadily risen while many competitors are slowing down, he said, yet more proof that it’s been effective.

Still, many brokers have chafed at the ultimatum. Even some who signed the addendum complained that 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, they said.

In August, a Florida mortgage broker named Dan O’Kavage filed a class-action-seeking lawsuit that targets the ultimatum.

The lawsuit argues that the “All-In” initiative undermined brokers’ ability to choose the best programs for their clients, creating harm and potentially higher costs to borrowers. It claimed that UWM “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. 

In his statement, Nevin said America’s MoneyLine won’t be taking on the biggest player in the channel alone.

“We have spoken to other customers and brokers throughout the country who intend to stand up with us and fight this tyranny together,” he said.  

Correction: An earlier edition of this story incorrectly stated that any broker who violated the addendum could face fines upwards of $5,000 per loan or $50,000 per month, whichever violation sum was greater. There is no time stipulation.

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Comments

  1. I would challenge the integrity of UWM’s claims about the number of brokers who signed the ultimatum. I doubt the number is anywhere close to the claim. The UWM ultimatum is a joke. I hope Nevins wins big. This is nothing more than an enormous “cancel culture” corporation(UWM) going after the little guy because he had the huevos to hold the line and refused to bend the knee. UWM is a smoke and mirror machine that has successfully convinced an army of newer, inexperienced loan officers that they walk on water. I don’t have to look any further than the Conquest product that they rolled out during the initial stages of Covid. In short, Conquest offered premium pricing on a 20 day lock period. If the loan file did not fund within the 20 day lock period, the punitive lock extensions attacked the loan officer’s compensation and forced the loan officer to close the loan for free. UWM did not share in the extension costs and truly showed exactly who there were to me. I had two files that were delayed by reasons that were beyond anyone’s control. The cost to extend the rate lock for 1 day was equal to a normal 30-day lock extension at any other lender. The cost to extend for 3 days was 150 basis points. I would not have written this response prior to the Conquest product and have moved my business to Rocket & Homepoint ever since. The ultimatum sealed the deal for me of who UWM really is, a smoke and mirror machine!

  2. Good for UWM. We signed the agreement and are honoring it. If they signed it and cheated, they deserve the lawsuit.

  3. No one does more for the mortgage broker community than UWM, it’s not even close. They simply asked brokers to make a choice and choose which lenders they want to work with. It seems extremely reasonable to me that they don’t want to support the brokers that want to work with lenders that are using mortgage brokers as a source to acquire customers that they can refi and sell other services to. UWM is making these strategic moves to protect the wholesale channel and the mortgage broker community they serve. This broker signed a contractual agreement stating they agree to use UWM and not Rocket and Fairway and then intentionally violated that agreement for their own gain and benefit. UWM is in the right here, the broker is wrong and behaving in a dishonest an unethical manner. The excuse they use is that they didn’t believe the agreement would be enforced and now attacking the basis of the agreement they made and signed. Black and white here, honor your agreements and your word and you don’t have an issue.

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