Almost two months after United Wholesale Mortgage (UWM) announced its controversial “us or them” policy, the fallout has continued to mount, with a Florida law firm announcing a class action lawsuit against what it calls an “unlawful, anticompetitive ultimatum.”
Tampa-based Parrish & Goodman Law Firm filed the suit on April 23 on behalf of “a large group of independent mortgage brokers” after UWM declared that it was cutting off business with brokers who also partner with Rocket Mortgage and Fairway Independent Mortgage Corporation. In a statement, Parrish & Goodman alleges that UWM’s “anticompetitive announcement harms brokers’ ability to choose the best programs for their clients, creating harm and potentially higher costs to borrowers as the end consumers.”
“UWM’s leveraged ultimatum is clearly unlawful, unfair and is designed to use UWM’s dominant market share … to limit the consumers’ choice and steer business for their own gain,” the statement said. “This position also runs counter to the actual value provided by mortgage brokers — the ability to shop all lenders and select the company and loan program that provides their clients the best possible rate, experience and process.”
Dan O’Kavage, president of St. Augustine, Florida-based brokerage O’Kavage Group, said he joined the suit because he “refuse[s] to have a lender dictate what is best for me, my clients and my business.”
“If a lender is going to force me into an ultimatum that restricts my ability to find the ideal loan for [my clients], I will always come down on the side of standing on principle and will fight back — as are a number of my peers,” O’Kavage said.
“If I didn’t want to operate in an independent fashion, I would work on the retail side of the industry and work in-shop for one of the major lenders,” O’Kavage added. “That was never something I considered nor wanted to do. I like being local. I like supporting my neighbors and community. UWM is stripping my freedom to be the best loan officer for my clients.”
Robert Goodman, partner at Parrish & Goodman, said that UWM’s actions are “not only entirely unethical, and the behavior demonstrated by a schoolyard bully, but also incredibly ill-conceived.”
The suit alleges three separate violations of the federal Sherman Antitrust Act. The first, according to Goodman, is an unreasonable restraint of trade, explicitly outlawed under the long-standing legislation.
“Saying, ‘You can’t work with us if you’re going to work with them,’ that to me is a basic restraint of trade,” said Goodman in an interview with Scotsman Guide. “I think it might even be a good textbook case in law school of restraint of trade.”
The second alleged violation, per Goodman, is that UWM’s policy constitutes steering — an act by a business to dissuade consumers or partners from using one third party over another — to the point that it stifles competition and breaks antitrust law. The third is that UWM’s policy represents an attempt at impermissible monopolization of the market.
The complaint also brings similar counts against UWM under Florida’s state antitrust laws, as well as a claim of tortious interference, which occurs when a party interferes with the relationships of another with intent of causing economic harm. Finally, the suit alleges violations of a state consumer protection statute known as the Florida Deceptive and Unfair Trade Practices Act, under which businesses are considered a “protected consumer.”
The suit asks the courts to deem UWM’s policy unenforceable while also compensating plaintiffs and class members for damages as a result of the policy.
“Our firm kind of has a reputation for doing David vs. Goliath cases,” Goodman said. “People started calling us, so I started formulating this pretty quick even before the ultimatum went into effect, before the March 15 deadline. … I actually drafted a letter basically demanding that [UWM] back down from this ultimatum and that we were going to move forward with a class action if not. And their position was that there was nothing wrong with what they were doing, so we filed.”
UWM maintains that its policy is legal and that its actions are in defense of the wholesale channel, given its claims of damaging business practices by Rocket and Fairway toward independent mortgage brokers as a whole.
“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,” said a company spokesperson for UWM. “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.”