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Fifteen named plaintiffs allege that Veterans United Home Loans — the nation’s largest lender of Department of Veterans Affairs (VA) mortgages — ran an illegal kickback and steering scheme that funneled borrowers into overpriced loans. The accusations were reiterated Thursday in court filings as the plaintiffs opposed a motion to dismiss an amended complaint that was filed by the lender in June.
The case, which is being overseen by the U.S. District Court for the Western District of Missouri, began in February when the plaintiffs sued Veterans United and Realty Search Solutions LLC, the lender’s real estate arm that does business as Veterans United Realty.
The original complaint accused Veterans United, a private, for-profit corporation, of misleading homebuyers to believe it’s connected to the U.S. Department of Veterans Affairs. According to court documents, multiple real estate agents and loan officers say they often lose business because prospective borrowers believe they must obtain financing through Veterans United due to incorrect assumptions that it’s affiliated with the VA.
Missouri-based Veterans United filed a motion to dismiss the original complaint in April. A company spokesperson said at the time that “this meritless lawsuit gets next to nothing right.” The plaintiffs are represented by Hagens Berman, a law firm that has also been involved in litigation against Zillow and Rocket Companies, following settlements tied to real estate brokerage commissions that totaled more than $1 billion.
In May, the plaintiffs filed an amended complaint, which increased the number of named plaintiffs from three to 15 while doubling the number of claims from four to eight. These included two counts of violations of the Real Estate Settlement Procedures Act (RESPA) along with violations of consumer protection laws in Missouri, Illinois, New York, Ohio and Texas.
Last month, Veterans United Home Loans and Veterans United Realty urged the court to dismiss the amended complaint. They characterized the expanded class-action suit as a baseless copycat case driven by anonymous competitor complaints rather than actual consumer harm. The defendants sought dismissal with prejudice, which would preclude the plaintiffs from filing the same claims again.
Opposition to dismissal request
According to Thursday’s court filings, the plaintiffs say the request by Veterans United to dismiss the amended complaint should be denied. They argued that they paid for settlement services covered under RESPA, and that “illegal kickbacks” fostered by the lender and its network of real estate agents inflated the cost of their transactions through higher mortgage rates and fees.
The filings say that Veterans United was founded by three individuals with no military service, yet it deliberately selected a name and branding that allows them to trade on the trust and reputation that veterans associate with the VA. The plaintiffs say the company promotes itself as the nation’s No. 1 VA lender and features a panel of “military advisers” on its website while burying disclaimers about non-affiliation with the VA.
Chad Moller, corporate communications manager for Veterans United Home Loans, issued a statement to HousingWire in which he said the plaintiffs’ attorneys “undermine the foundation of their claims in their brief, abandoning the false assertion in their complaint that Veterans United claimed to be part of the VA.”
Moller pointed to language in the filing that states “Defendants also charge that Plaintiffs did not find any instances in which they ‘held themselves out as the VA’ … but Plaintiffs never claim they expressly did so.”
“We are a private mortgage lender — not a government agency, and we have always been clear about that,” Moller said. “What sets us apart is service: the hands-on guidance and support that gets Veterans and military families, including many first-time buyers, through one of the most important financial decisions of their lives. That commitment shows in hundreds of thousands of reviews from the people we’ve served.”
Steering allegations centered on higher costs
The plaintiffs also reiterated their claims that the companies operate a business model in which agents who receive referrals are required to steer buyers to Veterans United Home Loans for financing. The company uses an app, AgentDash, to ensure agents comply with the steering arrangement, they say. Agents allegedly pay the company about 35% of their commissions — or roughly 1.05% of the home’s sale price — upon closing.
In a documented example provided to the court, the plaintiffs say that a customer was offered a loan with a 6.5% rate but was locked in at 6.75% three days later, even as market rates moved lower. This allegedly cost the borrower more than $6,000 at closing. Testimony given by loan officers say that loans from competitors cost $5,000 to $10,000 less than comparable products from Veterans United.
“Veterans United has a deliberate ‘bait and switch’ policy to lure in clients with enticing terms, only to change the terms as the transaction advances,” the filings state.
The plaintiffs go on to provide more alleged evidence of steering by citing high agent referral rates to a variety of Veterans United loan officers. Three agents cited in the filings used the company to finance more than half of their clients’ transactions. In every instance where Veterans United was chosen, a different LO was utilized.
The plaintiffs say these high referral rates, combined with a rotating group of originators, rule out any legitimate professional relationships and demonstrate widespread steering.
While the amended complaint initially included alleged consumer protection violations in five states, the plaintiffs this week dropped claims in Texas that were time-barred. Additionally, one plaintiff in Ohio was removed from the case due to statutory time limits for litigation.
