Judge Narrows Class-action Lawsuit Against Uwm, Dismisses Rico Claims

A federal judge has sharply narrowed the scope of a class-action lawsuit filed in April 2024 alleging that United Wholesale Mortgage (UWM) orchestrated a scheme with mortgage brokers to charge borrowers excess fees and costs.

Plaintiffs Therisa D. Escue, Billy R. Escue, Kim Schelble and Brian P. Weatherill — each of whom obtained a mortgage through UWM within the past four years — filed the lawsuit in a Michigan district court. They claim violations of the Racketeer Influenced and Corruption Organization Act (RICO) and the Real Estate Settlement Procedures Act (RESPA), among other allegations. 

The plaintiffs argued that UWM implemented initiatives designed to limit brokers’ ability to shop around for the best deals, despite marketing their independence. Among those were the “All-In initiative,” which prohibits brokers who work with UWM from also doing business with rivals Rocket Mortgage and Fairway Independent Mortgage Corp., and the “Lock-In” policy, which requires brokers not to shop after locking a loan, which usually happens at the beginning of the loan process.

Judge Brandy R. McMillion dismissed all RICO claims and most RESPA claims, except for those brought by two plaintiffs. Some state-level deceptive and unfair trade practices claims also survived for three plaintiffs.

The judge ruled, among other things, that the plaintiffs failed to establish proximate cause for their alleged RICO injuries.

“Plaintiffs spend approximately 138 pages in the Amended Complaint explaining the mortgage industry, UWM’s position in the wholesale market, and the alleged ‘tactics’ UWM employs to ‘cultivate loyalist brokers’ that funnel loans to UWM, which they allege costs UWM borrowers billions in above-market costs,” the judge wrote. “But key to the RICO claim is an understanding of what truly causes Plaintiffs’ injuries.”

Judge McMillion added: “As alleged, the false representation would be the proximate cause of Plaintiffs’ injuries. But the false representations about shopping the loan originated from the brokers, not UWM. While true, Plaintiffs point to marketing materials and websites that state brokers are ‘independent,’ the Court finds that it is the false representation and failure to shop the loan that serves as the proximate cause of Plaintiffs’ injuries.” 

Regarding the RESPA claims, the borrowers allege UWM gave brokers a “thing of value” when offering the opportunity to participate in their marketing programs – “receiving marketing materials and attending lavish trips” – in connection with the continued referral of business to UWM.

“As Plaintiffs aptly point out, the second pleading requirement — agreement or understanding — is met by showing a ‘thing of value’ is received repeatedly and is connected in any way with the volume or value of the business referred,” the judge stated. “Consequently, the Court finds that, as to Plaintiffs Jeffries and Singh, a RESPA claim under § 2607(a) has been sufficiently alleged.”

In a statement to HousingWire, a UWM spokesperson said: “We are very pleased to see the court dismissed nearly all claims and defendants, leaving only two narrow claims. This decision confirms the entire case is nearly resolved in our favor and underscores that there was no merit from the start to the allegations. We are confident the remaining claims will also be resolved in our favor.” 

A spokesperson for the plaintiffs did not respond to HousingWire’s request for comment.

The case was filed after a Hunterbrook Media report estimated that 8,682 loan officers at independent brokerages sent UWM more than 99% of their mortgages in 2023, with a total value of at least $11.7 billion. That was more than double the 3,831 brokers who sent at least 99% of their business to UWM in 2020.

UWM also became a target of the Ohio Attorney General, Dave Yost, who raised the same claims against the lender.