In an extraordinary blurring of the lines separating an independent and objective financial service media and the industry it covers, a startup news site owned and operated by a hedge fund has partnered with a law firm to put forth a proposed consumer class action lawsuit against UWM Holdings (NYSE:UWMC), the parent company of United Wholesale Mortgage.
The lawsuit was filed on Tuesday by four homebuyers in Florida, North Carolina and Tennessee who claimed UWM operated a “steering enterprise” with “captive” brokers that ran afoul of federal racketeering laws and other provisions. The lawsuit did not include brokers as defendants.
UWM’s alleged actions were first reported by Hunterbrook Media, a news startup is affiliated with Hunterbrook Capital, a hedge fund that simultaneously shorted UWM stock while the story was being published.
“Hunterbrook found $39 billion in mortgages came from brokers who sent UWM more than 99% of their business,” said the initial report. “In all, borrowers paid UWM between hundreds of millions and billions more in closing costs than people whose brokers found them typical loans — controlling for interest rates, transaction type, and other variables — Hunterbrook’s data analysis estimates. Litigators and mortgage experts say UWM’s conduct could constitute fraud and run afoul of laws passed after 2008 to protect borrowers. UWM has removed investor presentations from its website and made critical changes between its 2022 and 2023 filings — including removing language about how brokers shop for the best deal.”
Hunterbrook also boasted that it “submitted data analysis and research — as well as the planned date of publication — to Boies Schiller Flexner LLP, a litigation firm known for winning billions in damages from companies. Hunterbrook’s nonprofit affiliate has entered an agreement with BSF in exploration of a class action lawsuit against UWM seeking restitution for homebuyers. If you think you are paying too much on your mortgage, visit WasIRippedOff.com to learn if you might have used an independent broker who doesn’t shop and contact BSF.”
But while Hunterbrook shorted UWM, it simultaneously took a long position on its biggest competitor, Rocket Companies Inc. (NYSE:RKT). Hunterbrook’s coverage included an interview quote from Austin Niemiec, a Rocket Pro TPO executive, who claimed UWM CEO Mat Ishbia “is deliberately and systematically destroying [the broker] model to enrich himself. And he isn’t shy to admit it.”
UWM issued a statement that called the lawsuit a “sham,” adding that it will “defend these allegations to the fullest extent permitted by law.” The company also declared that “Hunterbrook is not a news organization. It is a hedge fund sensationalizing public information to manipulate the stock market to enrich themselves and their investors.”
To date, Hunterbrook Media’s only reporting involved UWM, with a second story that claimed the company took down online advertising after the lawsuit story was published. The news site self-identifies as a publisher focusing on “investigative and global reporting,” with a mission “to bring visibility to under-covered regions and accountability to under-scrutinized sectors.”
The case is Therisa Escue et al v. United Wholesale Mortgage LLC et al, U.S. District Court, Eastern District of Michigan, 2:24-cv-10853-PDB-DRG.
Photo: Screenshot of Hunterbrook Media’s coverage alleging misconduct by United Wholesale Mortgage
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