A new lawsuit filed by Ohio Attorney General Dave Yost claims the nation’s top mortgage lender is ripping off Ohio consumers.
It’s an interesting one because the role of a mortgage broker is to shop on a consumer’s behalf so they don’t have to.
Instead of working with a captive lender like a retail bank, homeowners can enlist a broker to do the comparison shopping for them among their wholesale lender partners.
But Yost claims Pontiac, Michigan-based United Wholesale Mortgage (UWM) colluded “with many brokers to funnel nearly all loans back to itself.”
In other words, instead of searching for the lowest rate, or fewest fees, they sent the majority of their loans to their preferred lender.
In the process, it may have cost these customers more thanks to higher closing costs and/or an elevated mortgage rate.
Is Your Mortgage Broker Shopping Around or Using a Preferred Lender?
At issue is the very nature of a mortgage broker, which as stated is a personal home loan shopper.
When you work with one, they are supposed to be an independent entity that acts as a middleman between you and their lender partners.
A typical broker might have a dozen or more wholesale lender partners they work with.
This means X percentage of their loans might go to lender A, another portion to lender B, and the rest are spread out among several other lenders.
If this is how their business is spread among partners, it would appear their doing their job properly.
But what if nearly all of their loans are going to just one lender? At that point, they might be no different than a captive loan officer who works for one bank.
Why even bother being independent at that point? Well, this is what Yost alleges in his suit.
It focuses on mortgages originated from 2021 through 2023, when UWM issued roughly $605 million in home loans to Ohioans.
While these were funded by “independent brokers,” the lawsuit states that they “directed 99% of their business back to United Wholesale Mortgage.”
And in the year 2023 alone, 50 of the brokers in question “funneled a combined $215 million in mortgages to the company.”
In other words, a lot of loan volume was winding up at one wholesale lender, instead of perhaps going to many different lenders, as the mortgage broker model intends.
As such, Yost has alleged violations of Ohio’s Consumer Sales Practices Act, the Corrupt Practices Act, the Residential Mortgage Lending Act, and others.
And seeking damages, including compensation for affected homeowners who may have received “above-market rates and fees.”
For its part, UWM has denied the allegations, referring to them as “frivolous” and “suspicious,” and saying it would defend itself to the fullest extent.
The Challenges of Growing to #1 as a Wholesale Mortgage Lender
While this is all up in the air, it does illustrate the difficulty of becoming the nation’s top lender when you’re a wholesale lender.
The entire mortgage broker business model is built on choice, and when you’re a single lender, it’s perhaps tricky to grow while still leaving room for the others.
On the one hand, if you’re the largest lender in the space, it means more brokers are sending you business.
And perhaps they’re doing so because you’ve proven yourself to be a reliable (and easy to work with) lender partner.
But it also means fewer loans are going to competing wholesale lenders, which ostensibly reduces competition and weakens the very business model built on choice and independence.
At the same time, lenders like UWM want to maintain their top position (they were the top mortgage lender in 2024).
This means offering special perks to brokers, whether it’s free credit pulls or discounted pricing on certain products, along with a suite of tools to make their lives easier.
UWM also launched a consumer-facing portal called Mortgage Matchup, which allows borrowers to find a local independent mortgage broker near them to work with.
But these brokers are typically approved to work with any number of wholesale lenders, including lenders other than UWM.
From UWM’s point of view, it’s promoting the wholesale channel. The question is if you become the go-to destination for brokers, when is it too much?
As a broker, do you still need to send X percentage of your loans elsewhere? I guess we’ll find out as this suit proceeds.
Either way, as I always say, you need to compare mortgage brokers too, even though they can shop on your behalf.
This means speaking to two or three brokers, along with retail loan officers, credit unions, etc. when doing your mortgage rate shopping to ensure you land the best deal.
Before creating this site, I worked as an account executive for a wholesale mortgage lender in Los Angeles. My hands-on experience in the early 2000s inspired me to begin writing about mortgages 19 years ago to help prospective (and existing) home buyers better navigate the home loan process. Follow me on X for hot takes.
