Apr 12, 2024 - News

Mat Ishbia's mortgage empire sued over fees

Mat Ishbia at a Suns game in March 2023.

Mat Ishbia at a Suns game in March 2023. Photo: Christian Petersen/Getty Images

Mat Ishbia's mortgage empire in Metro Detroit is the focus of a federal lawsuit alleging that borrowers nationwide paid inflated fees.

Why it matters: The lawsuit accuses Ishbia and his Pontiac-based company, United Wholesale Mortgage, of drumming up business by misleading borrowers into thinking their mortgage brokers would be shopping for the best deal.

  • Instead, the business model allegedly funneled thousands of borrowers to UWM, which then charged excessive fees that could amount to billions of dollars.

The big picture: Ishbia, a former walk-on to Michigan State's national champion basketball team, has led UWM to the top of the mortgage industry with divisive business tactics and an unapologetic disdain for the competition.

  • In 2022, he bought a majority stake in the Phoenix Suns and WNBA's Phoenix Mercury for $4 billion.

Between the lines: The allegations came at the same time that Hunterbrook Media, a news site affiliated with hedge fund Hunterbrook Capital, published a story critical of UWM.

  • Hunterbrook Media shared its data and research with the Boies Schiller Flexner firm, which is representing plaintiffs seeking class-action status in the suit filed April 2 in U.S. District Court.
  • Hunterbrook's article, also published April 2, includes a disclaimer that it's affiliated with Hunterbrook Capital, which has taken a short position on UWM's stock.

The other side: Ishbia dismissed Hunterbrook's work last week, suggesting it was funded by crosstown mortgage rival Dan Gilbert. UWM also released a statement saying that Hunterbrook's article is "riddled with inaccuracies" and the lawsuit is "frivolous."

  • A spokesman for Gilbert's Rocket Mortgage denied any financial interest in Hunterbrook or involvement in its article about UWM, per the Detroit News.

Catch up quick: UWM's business is built on relationships with independent — or wholesale — mortgage brokers who are hired by borrowers to find the best mortgage for them.

  • Brokers can earn a 1%-2% commission for their efforts. They are different from retail mortgage brokers employed by lenders such as Wells Fargo and Bank of America.

Friction point: According to the lawsuit, UWM enticed wholesale brokers with various perks to funnel borrowers toward UWM, which then charged excessive fees.

  • Last year, more than 8,000 wholesale brokers funneled to UWM 99% or more of their mortgages, which were valued at approximately $11.7 billion, the lawsuit claims.
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