“Breaking” mortgage litigation news
I’m not a news reporter[1] (and these Musings are not legal advice), but here I am reporting on the recent Opinion and Order issued on September 30, 2025 (the “UWM Decision”) by the Federal Court of the Eastern District of Michigan in the Boies Schiller class action case against UWM (the “UWM Case”). Strangely, the UWM Decision seems to have gone largely unreported in the housing industry news at the time I am writing this.[2] Nevertheless, I’m sure by the time most of you read this you will have seen some news coverage touting a big win for UWM, but there may be important reasons why UWM’s Mat Ishbia (and his lawyers) are not gloating and claiming victory just yet.[3] From my perspective, those reasons relate to RESPA[4] and the wholesale lending concern I have been raising since beginning this blog.[5]
The UWM Case revisited
In April 2024 I wrote a lengthy Musing about the UWM Case in which the business practices of UWM and its mortgage brokers were alleged to be, among other things, illegal racketeering (RICO), unfair, deceptive and fraudulent under applicable federal and state law. The plaintiffs made RESPA allegations almost as an afterthought (measuring the pages in the UWM Case’s Complaint devoted to each allegation). Despite the relatively scant attention and confusing pleading of the RESPA issues in the Complaint,[6] the RESPA claims seemed the most plausible to me.
RICO and UDAAP claims fail
Anyway, I mentioned at footnote 17 of that earlier Musing[7] that UWM would likely file a Rule 12 (b)(6)- Motion to Dismiss for Failure to State a Claim. That kind of motion assumes that even if all the facts alleged in the Complaint are taken as true, they don’t amount to valid claims. And, that is exactly what UWM did. The Court largely agreed with UWM in the UWM Decision, dismissing all of the RICO and almost all of the state law unfair/deceptive/fraud etc. claims. But, the Court left the door wide open on the RESPA claims which, as I will again explain below, should keep wholesale lenders, mortgage brokers and frankly, the entire mortgage industry nervous.[8] But first, a bit more on the dismissed claims.
I’m not going to dwell on the court’s reasoning for dismissing the RICO claims (and various related state law claims loosely grounded in UDAAP or fraud) other than to say: (i) as with mortgage occupancy fraud, RICO and the dismissed state law claims all have an element requiring “intent” that is typically difficult to prove, and (ii) RICO, a statute designed to take down organized crime, is not very conducive to shoehorn into a consumer protection vehicle, particularly in an era of appellate review emphasizing textualism and originalism.
So, in the Court’s words relative to certain fraud related claims,
“Here, even accepting all the facts as true, Plaintiffs simply allege a mere failure to disclose a conflict of interest. The only payment or “kickback” alleged in the Amended Complaint was the commission paid for closing the loan. But the Brokers were entitled to that by default, regardless of whether they provided a UWM, Rocket, or Huntington Bank[9] loan. That is how the business works.” UWM Decision at p. 46.
I’m not sure I agree with the Court’s description of “how the business works” in terms of what brokers are entitled to “by default”, but that description was relative to fraud-type claims which require proof of intent to prevail. RESPA’s anti-kickback provisions, on the other hand, don’t require a plaintiff to prove intent[10] and the Court seems to contradict itself later in finding allegations of kickbacks in other things of value in its RESPA claims analysis.
The RESPA allegations
Broadly speaking, the RESPA claims not dismissed allege (i) UWM provided “things of value”, above and beyond the commissions paid for brokers’ services rendered in return for referrals (the “8(a) Allegations”), and/or (ii) that payments to those brokers were made other than for services performed (the “8(b) Allegations”).[11] Since the plaintiffs didn’t allege any split of fees, however, given the Supreme Court’s precedent in Freeman vs. Quicken Loans[12] which required a split of fees to have an 8 (b) violation, I don’t really understand how the UWM Decision allowed the 8 (b) Allegations to stand. More color is provided below.
Equitable Tolling
The UWM Decision also disposed of all but two of the UWM Case’s class plaintiffs as being time-barred under RESPA because their loans were made more than 1 year from the filing of the Complaint.[13] UWM’s lawyers were able to persuade the Court that the facts did not warrant equitable tolling of the other plaintiffs’ claims. According to the Court,
“Equitable tolling requires that Plaintiffs show (1) the defendant concealed conduct that constitutes the cause of action; (2) defendants’ concealment prevented plaintiffs from discovering the cause of action; and (3) plaintiffs exercised due diligence that would have led to discovery of the concealed conduct.”
Here, the Court found that the plaintiffs’ own briefs seemed to contradict any concealment of the conduct, noting the UWM was transparent and even issued press releases about its initiatives that formed the basis of the factual allegations. So, only two plaintiffs remain on the RESPA claims.[14]
The RESPA Bombs
After all that winning, however, the UWM Decision drops a RESPA bomb on UWM and mortgage brokering generally considering the ubiquity of wholesale lender perks to thier brokers. Specifically, as to the 8 (a) Allegations,
Plaintiffs allege UWM gave brokers a “thing of value” when UWM offered brokers the opportunity to participate in their marketing programs, which included receiving marketing materials and attending lavish trips. Plaintiffs further allege that these things were conferred in connection with the continued referral of business to UWM. And as Plaintiffs aptly point out, the second pleading requirement – agreement or understanding – is met by showing a “thing of value is received repeatedly and is connected in any way with the volume or value of the business referred.” 12 C.F.R. § 1204.14(e) (emphasis added). Consequently, the Court finds that, as to Plaintiffs Jeffries and Singh, a RESPA claim under § 2607(a) has been sufficiently alleged.
(pages 55-56 case citations omitted)
Likewise, at pages 56-57, the Court found that the 8 (b) Allegations were also properly plead, noting,
“any charge made or received for the rendering of a real estate settlement service in connection with a transaction involving a federally related mortgage loan other than for services actually performed.” 12 U.S.C. § 2607(b) (emphasis added). A literal reading of the statute posits that Plaintiffs have sufficiently alleged facts to state a plausible claim for relief under § 2706(b).”
Again, I think factually the foregoing is really an 8 (a) claim in failing to meet the requirements of the 8 (c)(2) (“service rendered”) exception, and is not an 8(b) issue at all, but the effect is the same.
What about the HUD Policy Statements?
Notably, the UWM Decision did not mention anything about the HUD 1999/2000 Policy Statements about mortgage brokers needing to perform 5 out of 12 services to be paid a reasonable commission.[15] Instead, the Court just looked at RESPA’s plain language against the Complaint and determined that the 8(a) Allegations (and the 8(b) Allegations) were sufficient to allow the UWM Case to proceed. This is totally consistent with my prediction in Musing #80 from July 2024, about how the lack of Chevron deference (to the HUD Policy Statements) jeopardizes wholesale lending’s RESPA compliance and how a lender to lender exemption was absolutely needed to obviate the issue.
On the brighter side, despite the UWM Decision’s conclusions about RESPA’s application, it is not clear that the Court thinks the RESPA claims against UWM will eventually succeed, warning in its footnote #10,[16]
“And notably, the Amended Complaint is void of any breach of contract or RESPA claims against the broker, which is the person who allegedly was paid for services not rendered. [17] At this stage of the litigation, the Court allows the RESPA claims to proceed, but notes that at summary judgment, the analysis may be different.
While the UWM Decision’s footnote is a bit ominous for the mortgage brokers involved, given UWM’s priors, it seems highly unlikely that UWM will throw its brokers under the RESPA bus. Also, I suspect the Court will eventually figure out that (i) RESPA is a two-way violation (“give or receive”), and (ii) that to have an 8(b) violation, you need a split of fees among two parties, not just an unearned fee or overcharge by one of them.
Where’s all this heading? (not legal advice)
All that said, most cases settle, but if the UWM Case proceeds with the 8 (a) Allegations, the Court is likely to focus on the question I first raised six years ago about whether all the goodies[18] UWM provides to its mortgage brokers in addition to broker fees are “things of value” in return for referrals.[19] To that point, I have many times offered my sympathy to UWM’s attorneys in seeking to describe the RESPA compliant narrative of UWM’s business practices. They could now face some heavy narrative lifting defending the “thing of value” questions, and whether any “thing of value” provided was “in return for referrals”[20] and/or satisfied the reasonable fee for services rendered exception of RESPA 8 (C)(2).
RESPA Exemption Needed
I have noted many times before, referrals among licensed or exempt lenders should be exempted from RESPA’s anti-kickback provisions (similar to the exemptions available to real estate agents and title insurance companies). CFPB has express authority to create exemptions under RESPA and since lenders have all been otherwise regulated since the SAFE Act was enacted over a decade ago, CFPB’s failure to clarify the status of mortgage brokering under RESPA, relying on the old HUD Policy statements instead, is really inexcusable.
[1] Well, I guess I’m the highly uncompensated mortgage industry legal beat reporter for the Chrisman Commentary.
[2] But I have seen a lot of reporting about how the Phoenix Suns’ home arena has been renamed “Mortgage Matchup Arena”. More on that later.
[3] The plaintiffs can appeal this decision, replead and pursue just the RESPA claims (and a RESPA-bootstrapped Florida state law claim), seek settlement, and/or cut bait.
[4] UWM also has other litigation pending on similar claims brought by the Ohio Attorney General.
[5] I first mentioned this issue in the second edition of these Musings. See also, e.g., Ed. #90: An Open Letter to CFPB Leadership Section 4 c. “Make Mortgage Brokering Legal Again” and Ed. #80: Maybe RESPA Needed Chevron - by Brian S Levy Section titled “Is Mortgage Brokering Illegal”
[6] It’s fair to say that plaintiff’s counsel did not attend the Levy School of RESPA Compliance (LSRC).
[7] I provided the link again in case you skipped over it the first time. Please read that Musing first.
[8] Realtors and title companies should also be very nervous about related concerns. Despite express RESPA exemptions for those activities, and even though the CFPB’s RESPA case against Rocket was dropped, a recent drumbeat of state AGs and consumer advocate inspired lawsuits seems to be questioning referrals among real estate agents or title companies under UDAAP type theories. Has anyone considered RESPA 8(b) in all that?
[9] While UWM and Rocket Mortgage featured heavily in the UWM Case Complaint, I am not sure why the court chose to randomly insert “Huntington Bank” here. Perhaps the Court had Hunterbrook confused with Huntington? I think I had to correct that mistake in my earlier Musing too.
[10] Or do they? See this 2022 Musing in which I wondered about intent in proving RESPA violations.
[11] I actually think this is another way of describing the 8 (a) Allegation and is not really an 8 (b) issue at all. This is a result of the way the RESPA claims were framed in the Complaint.
[12] Given the animosity of Mr. Ishbia towards his crosstown rival Rocket (f/k/a Quicken Loans), there is going to be some interesting conversations with his attorneys about using that precedent to defend his company. It’s doubtful Mr. Ishbia will thank Dan Gilbert for going all the way to the Supreme Court to win that case.
[13] RESPA has a 1-year statute of limitations for consumer claims. Regulators have more time to bring RESPA claims.
[14] This demonstrates the importance of financial service defense lawyers being able to credibly argue against equitable tolling of consumer protection laws to limit client exposure.
[15] It is unclear whether either side in the UWM Case made the Court aware of HUD’s Policy Statements or, whether in a post-Chevron deference legal world, whether the Court would even care what HUD had to say about RESPA and mortgage broker compensation.
[16] Courts love footnotes too!
[17] This is my footnote, not the Court’s. As a reminder, RESPA Section 8 (a) applies whether you “give or receive a thing of value.” [emphasis added]
[18] Among them, assistance with marketing, compliance, lavish trips, and, now, necessarily very publicly directly marketing to consumers who are then referred to mortgage brokers to take applications.
[19] UWM isn’t the only wholesaler who provides “goodies”, but they are presently the only defendant in a RESPA lawsuit about it.
[20] Here’s an interesting LSRC question to ponder: while most RESPA experts will say that giving a referral of a customer is a thing of value, if, for example, you have an arena name or Super Bowl ads that generates mortgage consumers to your website, are those consumers your customers already such that any referral back from the broker you gave it to is not really a referral at all?