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United Wholesale Mortgage (UWM) issued a statement on social media Tuesday in its first substantive response to explosive allegations that it “corrupted” its mortgage brokers by banning them from doing business with competitors. It defended its business practices and highlighted recent court victories.
In the same post above linkedin and X, the platform formerly known as Twitter, will also pay legal fees to a business partner embroiled in a lawsuit related to what the financier characterized as “fraudulent charges” disclosed last week. I also promised. UWM short position.
of report By Hunterbrook Media A growing number of mortgage brokers are directing most or all of their business to UWM, which seeks class action status April 2 on behalf of borrowers allegedly harmed by UWM’s practices. claims to be the basis of the lawsuit.
At the center of the lawsuit is UWM’s controversial “all-in” ultimatum, which, starting in March 2021, requires rival Rocket -Prohibited loan applications from being sent to Mortgage and Fairway Independent Mortgage.
of lawsuit claims Mortgage brokers that transferred more than 75% of their loans to UWM accounted for 48% of the lender’s business in 2023, up from 24% in 2020, according to a Hunterbrook Media analysis of public data. That’s what it means.
UWM’s initial response to the report and lawsuit was to question the credibility of its source, Hunterbrook Media, to acknowledge that it received funding from hedge fund Hunterbrook Capital, and to acknowledge that Rocket Mortgage received funding from hedge fund Hunterbrook Capital. It was to accuse him of being behind the attack.
In addition to taking a short position in UWM, betting that UWM’s stock price will fall, Hunterbrook Capital bought stock in Rocket Companies, Rocket Mortgage’s parent company.
Matt Ishbia
April 4th, UWM CEO Matt Ishbia told reporters Covering the Phoenix Suns, the NBA team his family purchased last year, the report said, “Rocket Mortgage and Dan Gilbert are doing the Rocket Mortgage and Dan Gilbert thing. And that’s exactly what financing It is being done.”
UWM defended its business practices this week, saying: “We are 100% confident that nothing has and will not change because of Hunter Brook’s misinformation.”
In a statement posted to both LinkedIn and It was characterized as an “attack” that included “lies”.
“Mortgage brokers use an average of three to five lenders to evaluate each borrower’s various needs, including speed, service, interest rates, and costs/fees,” UWM said. “It is not uncommon or illegal for brokers to send most or all of their business to a particular lender. This is not unique to UWM brokers.”
UWM court victory
UWM also pointed to litigation victories related to the All-In Ultimatum. The all-in ultimatum was what the lender sought to enforce in a February 2022 lawsuit against mortgage broker American Moneyline (AML).
among them complaintUWM accused the mortgage brokers of violating the terms of their wholesale brokerage agreements not to submit mortgages or mortgage applications to Rocket and Fairway.
In response to UWM’s complaint, AML said: Counterclaim against UWM It also includes fraud and misrepresentation. After the majority of AML counterclaims were dismissed in court; Judgment dated December 22, 2022the company is amended counterclaim it is ultimately was fired March 29th, less than two weeks ago.
In dismissing an AML counterclaim against UWM, Judge Laurie J. Michelson cited a report and recommendations in a long-running lawsuit brought by Okavage Group, another mortgage broker that sued UWM in April 2021. Quoted.
Unlike AML, Okavage Group had refused to sign UWM’s wholesale brokerage agreement, which prohibited mortgage brokers from doing business with Rocket or Fairway. Instead, it sued UWM on behalf of the company and other mortgage brokers who opposed the ultimatum, alleging anticompetitive conduct under federal and Florida antitrust laws.
in amended complaint In the lawsuit, filed in August 2021, Okavage Group’s attorneys sought class action certification, treble damages, attorney’s fees, and injunctive relief.
After a magistrate is assigned to the case Recommendation They sought a complete dismissal, but lawyers for the Okavage Group filed a second lawsuit, and the case dragged on. Third correction Class action claims are expected to be filed in 2022 and 2023.
On February 6, 2024, U.S. Magistrate Judge Laura Rothman Lambert sentenced her. Second report It recommended that the Okavage Group’s charges be dismissed in all respects.
Lawyers for the Okavage Group argued that UWM’s ultimatum harmed consumers by reducing access to Rocket and Fairway mortgages, but the complaint states that “the ultimatum increased the cost of mortgages. “There is no fundamental fact that this has happened, and it does not specify whether the cost of all loans will increase.” Either mortgages are increasing or only wholesale market loans are increasing,” Lambert wrote.
However, the magistrate’s recommendation was non-binding and the case was reassigned to Judge Wendy W. Berger.
in Answer for March 15thlawyers for Ishbia and UWM argued, “After three years, four charges, two thorough reports and a judge’s recommendation for dismissal, this matter should be over.”
Both cases may continue to drag on in the Court of Appeals, but UWM expressed confidence this week that the company is on solid legal footing in light of recent rulings.
“Our competitors have been abusing the court system since day one,” UWM said on LinkedIn and X. “Back in 2021, many people were claiming that UWM was doing something wrong with the All-In Initiative and that it was violating the law and antitrust laws.” is broken. Therefore the broker should not work with UWM. The play didn’t work then, and it probably won’t work now. ”
hunter brook short position
UWM is now beginning to work through the details of the allegations detailed in the Hunterbrook Media report and related lawsuit, but continues to question its sources.
UWM claims that one of the authors of the Hunter Brook Media report “has worked for Rocket Mortgage affiliated brokers for the past five years and was actively working on this ‘report’ while employed there.” are doing.
Matthew Termin, one of the report’s authors, joined Hunterbrook Media as an investigative reporter in March after five years at Morty, he said. LinkedIn profile. Morty, a marketplace for mortgage brokers, lists Rocket Mortgage as one of his more than 25 lender partners. Website.
UWM declined to comment on whether Mr. Termine was the specific author, and Hunterbrook Media did not respond to a request for comment by publication time Wednesday.
Sam Koppelman, one of the founders of HunterBrook Media, said on social media last week that Ishbia’s belief that Rocket Mortgage is connected to HunterBrook is a “baseless conspiracy theory.”
However, Hunterbrook Media has been transparent about its relationship with Hunterbrook Capital, which has angered UWM by not only shorting its own stock but also taking long positions in Rocket Companies. bought.
It remains to be seen whether Hunterbrook Capital’s bet pays off.
UWM stockIt hit a 52-week high of $7.75 on March 25, but fell to $5.86 on April 3, the day after Hunterbrook Media published its report, but has since climbed above $6. It’s repulsive.
Other publicly traded mortgage lenders have also taken a hit to their stock prices this month after the latest inflation numbers cast doubt on whether the Federal Reserve will cut interest rates anytime soon. The volume of mortgage lending, particularly refinances, has declined since the Fed raised interest rates in 2022 and 2023 to combat inflation and is not expected to recover much this year.
share in rocket company The stock price on Wednesday was down 18% from its 2024 high of $15.01 hit on March 28.
At Wednesday’s closing price of $6.26, UWM stock is down 19% from its 2024 high.
Fairway Independent Mortgage is a privately held company. announced in march The company announced it would close its wholesale mortgage division and transition “to a 100% retail loan division.”
BTIG analysts Eric Hagen and Jake Katsikas said in an email to clients on Monday that the recent decline in UWM stock provides a favorable entry point for investors.
In issuing a buy recommendation with a price target of $8, BTIG analysts noted that Hunter Brook Capital’s short thesis premise, that brokers have an incentive to drive business to UWM, is a result of some He said he believed the assumption that borrowers were overpaying on their loans was “misguided.”
UWM’s profit margins “are not as noticeable as we would have expected, even if they are overcharging borrowers, and the company has openly and deliberately implemented loyalty incentives to support high-profit brokers.” ” wrote Hagen and Katsikas.
BTIG analysts said, “Loyalty points are typically applied to assist borrowers with interest rate purchases, thereby allowing brokers to offer the best interest rates and win more deals.” . “The flexibility we seek is [UWM] The ability to offer concessions and close loans quickly depends on its size, which is one of the key factors that draws us to this stock. ”
BTIG analysts said the “healthy demand” to acquire mortgage servicing rights (MSRs) for UWM-originated loans also “strengthens the company’s product offerings” and strengthens the company’s “overall connectivity.” “It also contributes to the flow of mortgage funds.”
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