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Mortgage lender United Wholesale sued by consumers alleging billions in excess fees

April 3 (Reuters) - United Wholesale Mortgage was hit with a proposed consumer class action on Tuesday in U.S. court accusing it of scheming with brokers to push home-buyers into expensive mortgages, costing them billions of dollars in excess fees.


Four residents of North Carolina, Florida and Tennessee filed the lawsuit, opens new tab in federal court in Detroit against UWM Holdings (UWMC.N), opens new tab and related entities, including United Wholesale.


The lawsuit alleged that UWM engaged in a mortgage loan “steering enterprise” with "captive" brokers in violation of federal racketeering laws and other provisions. The complaint said hundreds of thousands of mortgage loans are at issue nationwide.


Pontiac, Michigan-based United Wholesale, which bills itself as the country’s largest home mortgage lender, on Wednesday in a statement called the lawsuit a "sham" and said it will "defend these allegations to the fullest extent permitted by law."


Details of the alleged mortgage-lending fraud scheme were first published on Tuesday by startup Hunterbrook Media, which is affiliated with the hedge fund Hunterbrook Capital. The media outlet said Hunterbrook Foundation shared data analysis and research with Boies Schiller Flexner, the firm that filed the lawsuit.


Wholesale lenders don’t interact directly with prospective borrowers but instead use a network of mortgage brokers, who in turn engage with home buyers. The mortgage industry’s other channel is retail-focused, where a buyer works with a loan officer at a financial institution. No brokers were named as defendants.


Mortgage brokers in the wholesale arena are supposed to be independent and shop around to offer would-be borrowers a range of options, the consumers’ lawsuit said.


United Wholesale, according to the complaint, “corrupted a large swath of ‘independent’ brokers” — using them essentially as employees who could steer borrowers to United Wholesale mortgages that were not in the best interest of the consumer.

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