Rocket Sues UWM Over Loan Dispute

Rocket Mortgage has sued United Wholesale Mortgage (UWM) over an alleged breach of non-solicitation obligations related to Mr. Cooper Group, which Rocket Companies acquired last year. The complaint was filed in the Supreme Court of the State of New York.

The case centers on UWM’s alleged attempts to win back thousands of loans purchased by Mr. Cooper in 2024, costing Rocket millions. In the first half of 2024, Mr. Cooper paid UWM $773 million to purchase mortgage servicing rights for nearly 182,000 loans.

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As part of the purchase contract, UWM agreed to a non-solicitation covenant, which prohibited the company from soliciting the refinancing of any mortgages within the loan pools that Mr. Cooper purchased. However, Rocket alleged that UWM breached this covenant, causing Mr. Cooper to lose servicing rights for thousands of mortgages.

Rocket claimed that UWM is liable for nearly $100 million in losses incurred by Mr. Cooper due to prepayment rates that were about 2.5 times higher than those for comparable loan pools.

Mat Ishbia, UWM’s chairman, president, and CEO, allegedly instructed the company to breach the non-solicitation obligations over the past 18 months. Rocket alleged that Ishbia put a “bounty” on the loans that UWM had sold to Mr. Cooper, launching an incentive program called Refi Shield 100.

This program empowered UWM’s brokers, agents, and independent contractors to offer a 100 basis point reduction on refinance interest rates specifically to borrowers whose mortgages were serviced by Mr. Cooper. Ishbia allegedly told brokers that they could “go ahead and take advantage of” any loan that UWM had previously done with Mr. Cooper and refinance those clients.

UWM’s Response

UWM did not immediately respond to requests for comment, but the company told HousingWire that the lawsuit claims were “baseless and opportunistic.” The company stated that the lawsuit is a response to Rocket’s acquisition of Mr. Cooper and Rocket’s former head of wholesale joining UWM as a partner.

They said that “the timing speaks for itself,” implying that Rocket is motivated by a desire to protect its business interests. UWM also stated that Rocket has long operated on the premise that it owns the consumer relationship, not the broker.

Financial Implications

The financial implications of the alleged breach are significant, with Rocket claiming that UWM is liable for nearly $100 million in losses. The case highlights the importance of non-solicitation agreements in the mortgage industry and the potential consequences of breaching these agreements.

The lawsuit is a notable development in the ongoing competition between Rocket and UWM in the mortgage market. As the case progresses, it will be important to watch for any further developments or statements from the companies involved.