Mortgage lender United Wholesale Mortgage Corp. has moved to dismiss a lawsuit filed late last year by independent brokers who claim their contracts were breached when the Pontiac-based company changed commission structures.
As Crain’s reported at the time, and as the company outlined in more detail in its motion filed late Wednesday, UWM (NYSE: UWMC) alleges that the brokers were among a small few who had been “churning” borrowers, or urging them to refinance loans in short intervals so they could earn additional commissions.
UWM in its motion, filed in the U.S. District Court for the Eastern District of Michigan in Detroit, says the three brokers named in the class action lawsuit were among the approximately 75 independent brokers it found to be abusing an early payoff provision (EPO) as a way of achieving additional commissions.
“In 2020, UWM became concerned the EPO period was not effectively curbing the potential for churning,” attorneys for UWM wrote in the motion to have the case dismissed. “(The company) noticed a tiny (number) of its independent brokers were refinancing loans three to five times faster than industry standards.”
The company, which went public last month, says the class action lawsuit is without merit given the large number, roughly 11,000 brokers who originate mortgages with UWM.
“There are fewer than 100 putative class members who can claim any alleged monetary damages caused by the contractual change, even assuming they prove the merit of their claims,” reads the motion.
An attorney for the plaintiffs with Sommers Schwartz PC in Southfield did not immediately respond to a request seeking comment on the dismissal motion Thursday.
In the initial court filing, the three named brokers bringing the case said they’re owed between $10,000 and $77,000 in commissions.
UWM is being represented by attorneys for The Miller Law Firm PC in Rochester.
“UWM amended its early payoff provision for a tiny fraction of the brokers it does business with because they were suspected of churning loans,” the attorneys wrote. “UWM made this contractual change to protect consumers. Within months of this contractual amendment, the vast majority of affected brokers changed their behavior and were returned to the 6-month EPO.”