Propmodo Daily

By Franco Faraudo · Apr. 9, 2024

Greetings!

Short sellers often engage in smear campaigns against companies they bet against. However, a recent campaign against United Wholesale Mortgage (UWM) stands out. In today's email, we look at a hedge fund that has established a dedicated research team and digital publication solely to promote their claims that UWM pressures "independent" brokers into exclusive partnerships.

Also, this week in Propmodo Technology we're exploring multifamily management, with the support of our EV charging sponsor SWTCH. Discover how technology optimizes feasibility studies, the rising value of electric vehicle charging stations, and strategies to accelerate lease-ups.

Now, let's dig in!

The Sophisticated Smear Campaign Against United Wholesale Mortgage

Many mortgages are not actually funded by the banks and credit unions borrowers work with directly. Instead, they are often funded by third-party mortgage wholesalers. These companies rely on independent brokers to source qualified borrowers. United Wholesale Mortgage (UWM) is the largest wholesale mortgage company. Founded in 1989, UWM has grown into a $10 billion powerhouse with over 6,000 employees. Company founder Mat Ishbia joined the ranks of billionaire sports team owners when he purchased the Phoenix Suns for $4 billion in 2022.

UWM and Ishbia are now under scrutiny by hedge fund Hunterbrook Capital. Hunterbrook alleges that UWM's claims of using "independent" brokers are misleading. They assert that UWM employs a system of rewards and punishments to "cultivate loyalist brokers" (a term used by UWM in an investor presentation). Hunterbrook claims UWM's tactics for pressuring brokers include offering preferential directory placement and pursuing lawsuits against those who seek better deals from competitors.

Hunterbrook Capital has taken a short position in UWM. Instead of solely issuing a press release on their findings, they've established Hunterbrook Publishing, a platform dedicated to disseminating their research. The hedge fund has raised $100 million to support their strategy of making trades based on publicly released investigative reports.

The campaign against UWM isn’t just a digital assault either; the Hunterbrook team has also filed a whistleblower report with the S.E.C. United Wholesale Mortgages claims that the entire campaign against them is coming from its main competitor, Rocket Mortgages. The owner of Rocket Mortgages, Dan Gilbert, also owns the Cleveland Cavaliers. Ishibia has been an outspoken critic of Gilbert and even went as far as to cancel Rocket Mortgage’s sponsorship contract with the Suns when he became owner.

Regardless of any potential involvement by Rocket Mortgages, UWM faces a significant challenge. Hunterbrook has brought on a certified fraud examiner and a data scientist to investigate claims that UWM restricts brokers from comparing loan options with other lenders. If Hunterbrook's media platform succeeds in shaking investor confidence or triggering a federal probe, it could signal a shift in how corporate wrongdoing is exposed – from courtrooms to the world wide web.

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