A short seller targeted the nation’s largest mortgage lender, which isn’t taking the challenge lightly.
New York-based Hunterbrook Capital has taken a short position in Mat Ishbia’s United Wholesale Mortgage, Inman reported. The hedge fund also took a long position in Ishbia’s top competitor, Rocket Companies.
Hunterbrook is shorting UWM by borrowing shares in the company and selling them to investors. Hunterbrook stands to make a profit if the value of the shares decline, allowing the hedge fund to buy them back at a lower price.
The shorting comes after an affiliate of Hunterbrook published a controversial report, which it detailed to a law firm before publicly releasing. The law firm then filed a complaint against UWM, alleging the lender’s practices are harming borrowers. The firm is seeking class-action status.
The lawsuit alleges UWM’s “All In” initiative has led mortgage brokers to “artificially steer loans to UWM,” meaning brokers aren’t always securing the best deals for their clients. The company’s initiative bars any broker who does business with UWM from working with competitors Rocket Mortgage and Fairway Independent Mortgage.
“UWM has systematically and intentionally corrupted the wholesale mortgage channel through fraudulent practices to line its own pockets and those of its senior executives, including Mr. Ishbia, at the expense of everyday Americans,“ John Zach, an attorney for Hunterbrook, said in a statement. “Homebuyers are legally and morally entitled to receive honest, unconflicted assistance from the brokers they hire to help them secure the lowest prices for a loan. UWM turns this process on its head by corrupting brokers and tricking homebuyers into paying billions of dollars more in costs and fees.”
In a statement, UWM called the lawsuit a “sham.” The company has said its growth in market share has been driven by its ability to offer borrowers better deals; the “Game On” initiative, for instance, brought rates down between 50 and 100 basis points across loan types.
UWM lost $69.8 million last year, though it originated nearly $94 billion in purchase loans, a record for the company.
UWM also said the report from the Hunterbrook Capital affiliate is “riddled with inaccuracies and incorrect information,” adding that “a hedge fund scheme using journalists to short a stock is not only unethical, it may be fraudulent.” The Financial Times reported that Hunterbrook raised $100 million “to trade on reports’ scoops.”
Shares in UWM hit a 52-week high of $7.75 on March 25, only to dip down to $5.86 on Wednesday, hovering near their lowest mark of 2024. As of 11:00am ET on Thursday, the stock is up 3.4 percent on the day and is back above $6.
