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Mortgage Brokers File Class Action Against Leading Wholesale Mortgage Lender

Philip R. Stein

United Wholesale Mortgage (UWM), the nation’s largest wholesale mortgage lender, announced on March 4, 2021, that it would no longer do business with mortgage brokers who also worked with Rocket Mortgage (the online loan shopping and application tool offered by Quicken Loans) or with Fairway Independent Mortgage Company, claiming that those two rival companies “are hurting the wholesale channel.” UWM’s “us or them” ultimatum sparked a furor and no shortage of angst among the voluminous group of brokers who had been dealing profitably with both UWM and at least one of those rivals to that point. Now, the ultimatum has led to a class action lawsuit against UWM.

A lawsuit filed on April 23 on behalf of a large group of independent mortgage brokers alleges that UWM’s edict is “unlawful” and “anticompetitive.” A statement released at the time of the suit’s filing asserts that “UWM’s leveraged ultimatum is clearly unlawful, unfair and is designed to use UWM’s dominant market share … to limit the consumers’ choice and steer business for their own gain.”  The statement went on to note that “[t]his position also runs counter to the actual value provided by mortgage brokers — the ability to shop all lenders and select the company and loan program that provides their clients the best possible rate, experience, and process.”

The suit claims three separate violations of the federal Sherman Antitrust Act. One is for unreasonable restraint of trade. The second claim is that UWM’s action constitutes impermissible “steering” — an act intended to dissuade consumers or business partners from using a third party’s product or services— to an extent that harms competition and violates antitrust law. The third alleged violation is that UWM’s policy is an attempt to unlawfully monopolize the wholesale mortgage market.

In addition, the class action lawsuit asserts causes of action under Florida’s state antitrust laws and the Florida Deceptive and Unfair Trade Practices Act, as well as a state law claim for tortious interference. The suit requests that the court rule that UWM’s policy is unenforceable and seeks compensation for named plaintiffs and other class members for damages that they sustained as a result of the policy.

Rocket Mortgage announced in March that “22 of our 25 largest partners have rejected UWM’s ultimatum and have elected to continue working with our company.” A company spokesman said recently that over 9,000 brokers had rejected UWM in favor of continuing to work with Rocket. Both the Mortgage Bankers Association and the National Association of Mortgage Brokers have been critical of UWM’s action. Whether the widespread concern and disenchantment that the ultimatum produced will translate into a successful class action remains to be seen.

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