Top originator United Wholesale Mortgage settled a lawsuit with broker shop Mid Valley Funding, in which the broker shop was accused of violating UWM’s controversial ultimatum by sending loans to rivals Rocket Mortgage and Fairway Independent Mortgage.
The settlement, reached on June 5, dismissed the lawsuit with prejudice, requiring Mid Valley to pay $40,000 to UWM, as the brokerage firm acknowledges that it sent loans to Rocket and/or Fairway after the ultimatum was in effect.
UWM launched the “All in” initiative in March 2021, requiring brokers partners to stop sending loans to Rocket and Fairway for review, underwriting, purchase and funding if they were also doing business with UWM. Brokers who violated the terms could face fines upwards of $5,000 per loan or $50,000, whichever violation sum was greater.
In February 2022, UWM sued California-based Mid Valley for violating the agreement and demanded that the broker shop pay $310,000. Mid Valley, which started doing business with UWM in June 2015, sent at least 62 mortgages to Rocket and Fairway, the lawsuit claims.
UWM complained in the lawsuit that it provides brokers “considerable resources” to grow their businesses. But submitting loans to competitors damaged the company, including taking advantage of its investments and undermining the agreement.
Representatives for Mid Valley did not immediately return a request for comment.
Mat Ishbia, UWM president and CEO, said in a statement, “It’s very unfortunate to see a company like Mid Valley breach their contract, but we’re going to continue to do what’s right for the broker community.”
In a recent interview with HousingWire, Ishbia argued that Rocket and Fairway “were doing stuff to hurt the broker community systematically,” and “The broker community is better” because of the ultimatum.
Rocket and Fairway have argued that UWM’s “All In” tactic was brazen attempt at limiting broker choice to harm two rivals. They said it was absurd that Ishbia’s power play would be considered high-minded.
Ishbia hasn’t backed down. “The reality is if a broker breaks the contract and if they have, we will address it, and we will win,” he said in a statement. “And then we’ll take that money and put it towards findamortgagebroker.com to help the rest of the brokers because we don’t want the money.”
UWM has several other related lawsuits ongoing.
The lender also sued Californian brokerage shop Kevron Investments Inc. in February 2022, demanding $110,000 in liquidated damages, attorney fees and other expenses because the company allegedly submitted at least 22 mortgage loans to the competitors.
In the same month, UWM filed a lawsuit in Michigan federal court against America’s MoneyLine (AML), a high-volume brokerage firm based in Southern California. According to the lender, AML owes it $2.8 million by continuing to do business with both UWM and Rocket.
Kevron and AML’s cases are still in progress.
In February 2023, Rocket said it would pay the legal costs of brokerages who are sued by UWM for sending loans to Rocket.
In an interview with HousingWire in February, Rocket’s wholesale chief Mike Fawaz said Rocket hasn’t thought about how much cost would incur to support the decision. He said the ‘bully shield’ initiative, as it has been dubbed internally, was “really a drive towards doing the right thing.”