A Florida mortgage broker has filed a complaint in federal court seeking a class-action lawsuit against Pontiac-based United Wholesale Mortgage Holdings Corp. and CEO Mat Ishbia over its March ultimatum that said the lender won't work with brokers who continue to do business with crosstown rival Rocket Companies Inc. and Wisconsin-based Fairway Independent Mortgage Corp.
The complaint filed Friday by The Okavage Group LLC alleges millions of dollars in damages to the industry resulting from the March 15 deadline. UWM said brokers working with it and Rocket or Fairway had to sign an addendum agreeing to no longer originate mortgages through them or else pay a fine of $50,000 or more.
"It's bad for my clients; it's bad for the industry," said Dan O'Kavage, owner of the brokerage in St. Augustine, Florida. "That’s the whole reason why I did this. This decision was detrimental to the client base of the mortgage brokers."
UWM is the largest wholesale mortgage lender in the country and originates loans exclusively through mortgage brokers who work with home buyers and sellers to find them the best interest rates and mortgages for their needs. Rocket and Fairway conduct business with brokers, but they also loan directly to home buyers and sellers in the retail channel where originations often earn larger margins.
O'Kavage's lawsuit, which has not been certified, alleges claims by UWM that Rocket and Fairway are attempting to undermine the wholesale channel are false. It says UWM account executives even went so far as to denigrate the health of Rocket chairman Dan Gilbert, who had a stroke in May 2019.
The lawsuit alleges violations of federal and Florida antitrust law, tortious interference of business relationships and deceptive and unfair trade practices.
"Defendants’ Ultimatum as implemented is so likely to have anticompetitive effects," Robert Goodman, O'Kavage's attorney, wrote in the complaint, "that an observer with even rudimentary understanding of economics could conclude harm to customers and the wholesale mortgage market."
UWM previously said about 4,600 of its 12,000 brokers also worked with Rocket or Fairway before its ultimatum. In March, the company said about 3,000 had signed the addendum.
“UWM is committed to and focused on the growth and success of over 10,000 independent mortgage brokers across America who chose to be All In for the broker channel," a company representative said in a statement. "We are not focused on the roughly 600 who declined to move forward as a partner. We do not comment on legal matters that are currently pending, especially those that have no merit or substance.”
O'Kavage says he did not sign or decline UWM's addendum. He understands his account there will close after a final loan being processed from before the ultimatum deadline closes in June. The 35% of his business that had gone to UWM, he said, has been sent to other brokers, though he still does about the same amount — 35% — of work with Rocket.
"It's not as clean of a system," O'Kavage said of the other lenders. "I have to get more into the actual process, which prevents me from doing other jobs with new business. It’s created more paperwork, more process, more of a learning curve for me."
More than a handful of other brokers from across the country also have signed onto the suit, Goodman told The Detroit News. And O'Kavage says he has received calls, texts and social media messages from other brokers thanking him for pushing back on the matter.
"Defendants’ illegal scheme is pernicious, or manifestly anticompetitive, because, regardless of whether any broker agreed to the Ultimatum," Goodman wrote, "it limits the choice of lending options available to brokers, and ultimately the loan options available to consumers, in the relevant market."
The complaint points to a comment Ishbia made during a Facebook Live announcing the ultimatum that UWM is “not trying to be the best priced."
"Defendants’ Ultimatum," Goodman wrote, "limits the ability of Plaintiff and Class Members to offer to their clients (consumers/prospective borrowers) the best-suited mortgage loan products to fit their clients’ (consumers/prospective borrowers) needs, thereby restraining trade and limiting competition."