United Wholesale Mortgage, which is suing a mortgage broker to defend its contract, could face public scrutiny.
Ever since UWM first instituted its policy of prohibiting any mortgage broker who sells to UWM from also selling loans to Rocket Pro TPO or Fairway Independent, critics have complained that UWM is acting anti-competitively.
Now the company has taken action by filing a multi-state lawsuit against America's Moneyline, a mortgage broker based in Aliso Viejo, California.
While there were "some brokers" who breached the agreement on a small scale, UWM was able to address the issue head-on, the company said in a statement. But America's Moneyline has acted outrageously, with UWM claiming the brokerage firm did so "knowingly and intentionally".
"After speaking with them, they continued to submit loans to UWM and Rocket Mortgage," the statement said. "Therefore, UWM is taking legal action to enforce the penalties set out and agreed in the contract."
America's Moneyline has been contacted for comment, but the company has not yet responded.
"The Board of NAMB is aware of the lawsuit and does not feel responsible for commenting on the case at this time because we believe it is better to pursue legal action and await the court's decision," said Linda McCoy by Group President, in a statement.
To date, no action has been taken against UWM for possible anticompetitive activities by state or federal regulators, including the Federal Trade Commission. However, that is one of the points made in a previous legal challenge to the big lender's lawsuits. That lawsuit, filed last April by Okavage Group, a mortgage broker in St. Augustine, Fla., is still pending and the judge is currently considering the pre-trial motions.
While that lawsuit hasn't caught the attention of regulators, the new one could open a can full of worms.
“A lawsuit like this is going to draw attention, and when you draw attention, you often draw a lot of negative attention,” said Marx Sterbcow, a mortgage industry compliance attorney who is not involved in any of the litigation. “And that negative attention can sometimes come back to bite you in the butt. I see state mortgage regulators, state mortgage regulators taking a very keen interest in this case, as does the FTC, so I think that's going to be something that's sure to get their attention."
As a result, this would not have been a route that Sterbcow would have pursued in the first place.
“What is the purpose of being a broker? If you are restricted from using just one company, you are no longer a broker,” he said. "Basically, you're becoming a kind of pseudo-network branch, and that's not helpful to consumers."
Although UWM allows mortgage brokers to work with any wholesaler except Rocket or Fairway, the deal removes two of UWM's biggest competitors.