Rocket sues UWM for putting a ‘bounty’ on Mr. Cooper loans 

Rocket Mortgage has sued mortgage rival United Wholesale Mortgage (UWM) over its alleged "willful and wanton" breach of non-solicitation obligations owed to mortgage servicer Mr. Cooper Group, which Rocket Companies acquired last year. The complaint was filed Thursday in the Supreme Court of the State of New York.

What the case is about: In the first half of 2024, Mr. Cooper paid UWM $773 million to purchase mortgage servicing rights for nearly 182,000 loans, which had a cumulative unpaid principal balance of about $65 million. As part of the purchase contract, the complaint said, UWM agreed to a non-solicitation covenant whereby UWM would be "prohibited from soliciting directly or indirectly, the refinancing of any mortgages within the loan pools that Mr. Cooper purchased."

But Rocket alleged that UWM did just that, causing Mr. Cooper to lose servicing rights for thousands of mortgages. 

Rocket claimed UWM is liable for the nearly $100 million that Mr. Cooper incurred as a result due to prepayment rates about 2.5 times more than those for comparable loan pools. Companies often pay more for servicing rights with non-solicitation agreements — and if the seller solicits borrowers to refinance those loans, the value of servicing rights decreases.

A 'bounty' on Mr. Cooper loans: Rocket further alleged that UWM "flagrantly" breached the non-solicitation obligations over the past 18 months at the instruction of Mat Ishbia, UWM's chairman, president and CEO. 

"Mr. Ishbia put a 'bounty' on the loans that UWM had sold Mr. Cooper and launched an incentive program called 'Refi Shield 100' that empowered UWM's brokers, agents, and independent contractors to offer a 100 basis point (1%) reduction on refinance interest rates specifically to borrowers whose mortgages were services by Mr. Cooper," according to the complaint.

Ishbia is alleged to have told brokers "that '[a]ny loan that we've ever done with Mr. Cooper that we've sold the servicing, you can go ahead and take advantage of it and go refinance these clients.'"

Rocket said UWM launched two separate initiatives in the fall of 2024 as part of its efforts to reacquire the loans: A 75-basis-point reduction program on refinancing interest rates and the "KEEP" system — a proprietary refinance-generation A-powered tech that searched for and identified opportunities to incentivize borrowers to refinance. KEEP was launched specifically to target the loans sold to Mr. Cooper and not the general public, the complaint claimed.

The alleged scheme was part of a larger effort to "manage mounting business difficulties" as a result of margin compression, tech and servicing expenses, and the "fragility of a business model heavily dependent on continuously generating origination and refinance volume," according to the filing.

What UWM has said: UWM did not immediately respond to Real Estate News' request for comment, but the company told HousingWire that the lawsuit claims were "baseless and opportunistic."

A company statement framed the lawsuit as a response to Rocket's acquisition of Mr. Cooper and Rocket's former head of wholesale joining UWM as a partner. "The timing speaks for itself," UWM said. "Rocket has long operated on the premise that it owns the consumer relationship — not the broker."