Top U.S. lender United Wholesale Mortgage (UWM) notched a partial win in a lawsuit against broker shop America’s MoneyLine (AML) regarding the controversial “ultimatum” it imposed two years ago.
UWM CEO Mat Ishbia announced in March 2021 that brokers who did business with Rocket Mortgage or Fairway Independent Mortgage could not also send loans to UWM, which the lender called the “All In” initiative. Any broker who did so would face fines upwards of $5,000 per loan or $50,000, whichever violation sum was greater.
In February 2022, UWM filed a lawsuit in Michigan federal court against AML, a high-volume brokerage firm based in Southern California, for breaching their amended wholesale broker agreement imposing the ultimatum. According to the lender, AML owes it $2.8 million by continuing to do business with both UWM and Rocket.
A few days after UWM filed the lawsuit, AML countersued the wholesale lender. It argued that UWM’s assurances were fraudulent; promissory estoppel should apply to enforce those assurances; the ultimatum is invalid and unenforceable for various reasons, and it is entitled to a declaratory judgment.
UWM asked the court to dismiss AML’s counter-complaints. Ultimately, on December 22, Judge Laurie Michelson granted UWM a motion to dismiss AML’s fraud and promissory estoppel claims. However, a declaration that the ultimatum violated antitrust law survived.
A spokesperson for UWM said the company does not “comment on legal matters that are currently pending.” HousingWire sent requests for comments to AML’s representatives, but they have not responded. AML has to prove in writing why the court should exercise its discretion to hear the antitrust law claim by January 9.
Judge Michelson based her decision on the broker agreement, which states that UWM may amend its policies, procedures, requirements and instructions from time to time. And the simple loan or application submission – without further signature or assent of any kind – represents the broker shop agreement with the amended policies.
The lawsuit claims that since signing the “All-In” addendum until February 2022, AML had submitted at least 560 mortgage loans to Rocket and Fairway.
Regarding the fraud claim, the judge wrote, “AML has not identified any duties that UWM violated that are separate and distinct from the agreement.”
She also added that “because the parties reduced their agreement to a writing, the claim for promissory estoppel fails.”
Judge Michelson decided that the antitrust subclaim will survive, as UWM did not propose any other basis to dismiss it.
Many brokers are critics of the ultimatum, even some who signed the addendum. They complain that it cuts at the identity of a mortgage broker – being able to offer consumers the greatest range of mortgage options was central to their mission.
And AML was not the first broker shop to enter a legal battle with UWM.
In August 2021, a Florida mortgage broker named Dan O’Kavage filed a class-action seeking lawsuit that targets the ultimatum on the grounds that it violates the Sherman Act. On December 14, 2022, UWM filed a motion to dismiss a second amended class action complaint – the plaintiff’s response has to be filed by February 1, 2023.
After filing the lawsuit against AML, also in February 2022, UWM sued California-based brokerage shops Kevron Investments Inc. and Mid Valley Funding & Inv. Inc. The cases are in the plaintiff’s expert disclosures and fact discovery phases. UWM requests $420,000 in damages.