3 things to know about the UWM mortgage lawsuit 

The mortgage industry seems to be experiencing its own Sitzer/Burnett moment when it comes to allegations of steering and inflated fees.

Last week, four residents of three states filed a class action lawsuit against United Wholesale Mortgage, based in Pontiac, Michigan. The suit accuses the company of "orchestrating and executing a deliberate scheme, in coordination with a host of corrupted mortgage brokers, to cheat hundreds of thousands of borrowers out of billions of dollars in excess fees and costs that they paid to finance their homes," according to court documents filed in a Michigan District Court.

The plaintiffs allege this was done through a restrictive agreement between UWM and independent mortgage brokers that resulted in steering, as brokers would push homebuyers to UWM mortgages rather than finding mortgages with the lowest rate or the best fit for specific buyers.

One policy — known as "All In," according to court documents — "contractually prohibits any broker who does business with UWM from shopping for loans from two of its competitors, Rocket Mortgage and Fairway Mortgage."

The court filing goes on to say, "The illicit scheme and enterprise go to the heart of the wholesale mortgage industry in America."

In a statement, UWM called the lawsuit a sham and said it will defend itself in court.

This case has echoes of the antitrust litigation surrounding buyer agent commissions. In Sitzer/Burnett and the many copycat lawsuits that have followed, plaintiffs accused brokerages and associations of steering and creating a scheme to keep fees inflated. 

Here are three other things to know about the UWM case.

Real estate agents and brokers are not involved

This lawsuit is directed at UWM, which is a mortgage wholesaler that relies on third-party intermediaries, or independent mortgage brokers. 

While court documents mention "corrupted mortgage brokers," no mortgage brokers are specifically named as defendants.

Instead, the suit targets Mathew Ishbia, CEO of UWM, as the defendant in the case.

Two of the CEOs don't like each other

While they share common ground as owners of NBA teams, there is no love lost between Ishbia, who owns the Phoenix Suns, and Dan Gilbert, who owns Rocket Mortgage and the Cleveland Cavaliers.

"He doesn't like me, and I don't like him, right? That's how it is," Ishibia said on "The Bill Simmons Podcast" a year ago.

Ishbia has said Rocket Mortgage is behind the class action lawsuit, according to a video posted on X last week by a reporter from the Arizona Republic. In the video, Ishbia said of a report by Hunterbrook Media related to the charges: "That's Rocket Mortgage and Dan Gilbert doing Rocket Mortgage and Dan Gilbert things."

Rocket Mortgage said in an email statement to National Mortgage Professional that the company had no involvement in the Hunterbrook Media article: "Dan Gilbert and Rocket Mortgage have no investment, other financial interests or relationship to Hunterbrook Media. The professional investigation speaks for itself and appears to be based on factual, public information uncovered by the journalists who conducted the investigation." 

It shouldn't affect how buyers get home loans

Most Americans are more familiar with the retail mortgage market than with wholesale. The retail side constitutes about 60% of the overall mortgage market, the court filing said, with banks like Chase or Bank of America providing the mortgage.

Even in the wholesale mortgage market, the outcome of this case won't significantly change how a buyer finances a home purchase.

While this lawsuit is a big deal to UWM in terms of potential damages, unlike the Sitzer/Burnett case, there are no requests for significant rule changes. The plaintiffs are focused on a monetary award and other relief from the court.