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BY: Jason J. Thompson | IN: Class Action & Commercial Litigation
Approximately 100 mortgage brokers working with United Wholesale Mortgage (UWM) received a shocking video email on March 12, 2020. In the message, UWM Executive Vice President Allen Beydoun told them that UWM was implementing a 12-month early payoff policy for all loans closed in their name within the preceding year. In effect, the company was seizing the brokers’ earned commissions.
Through this correspondence, UWM unilaterally changed the brokers’ contracts with the company, increased the commission vesting period from six months to one year, and de-vested them of mortgage commissions. UWM has admitted to recouping $870,000 in earned commissions from deals that had closed and funded before the March 2020 amendment.
Several brokers hired Sommers Schwartz to sue UWM in a breach of contract class action lawsuit on behalf of all brokers affected by UWM’s unilateral change to its contract terms.
The brokers’ lawsuit seeks a court order finding the unilateral change to be improper and void and the return of any money UWM withheld. The order would give peace of mind to all brokers with deals affected by UWM’s change to its early payoff and commission structure.
The court agreed with the brokers’ arguments about the vested commissions, casting doubt on UWM’s claim it had the power to unilaterally amend the brokers’ commission agreements:
In this case, a conservative estimate of the value of the declaratory judgment is about $4.3 million. So the amount recouped from the brokers and the value of the declaratory judgment exceed $5 million on their own. Additionally, the brokers estimate that there will be $1 million in attorney fees. (ECF No. 10, PageID.207.) Given these figures, the Court concludes that the brokers’ amount in controversy was made in good faith and likely exceeds $5 million.
But the brokers insist that “Per [section 7.08], brokers cannot agree, by virtue of submitting new Mortgage Loan Applications or Mortgage Loans, to a Broker Agreement amendment that applies to loans that had already closed and funded as of the date of the amendment.” (ECF No. 13, PageID.280.) The Court agrees, and for similar reasons to those just explained.
According to the court, UWM’s broker contracts can only be amended through either a bilateral amendment in writing or a prospective amendment by UWM. The court’s full opinion and order can be read here.
If you have are a mortgage broker affected by UWM’s retroactive contract modification, or if you have information or would like more information about the class action, please contact Sommers Schwartz attorney Alana Karbal at (248) 355-0300.
View all posts byJason J. Thompson
Jason Thompson is a nationally board certified trial attorney and co-chairs Sommers Schwartz’s Complex Litigation Department. He has a formidable breadth of litigation experience, including class action and multidistrict litigation (MDL), and practices nationwide in both state and federal courts.