Rocket's Record Purchase Pipeline & VU's Alleged Floating Rate Trap

Did Veterans United trick military vets into thinking it was the VA & then overcharge them on mortgages? A class-action lawsuit says, “Sir, yes sir!” Filed in February & amended this week w/ new witness statements & docs from agents & loan officers, the case argues VU's dominance in VA lending is built on a deliberate illusion 🪄 .

"Veterans United Home Loans has the highest volume of VA loans because homebuyers assume that Veterans United is part of the VA," the complaint reads. "This is no accident. It is the intended goal of Veterans United's marketing campaign."

VU strenuously denies deceiving anyone & calls the suit "meritless."

In today's Mortgage Scoop, we review the evidence of the alleged bait-and-switch play. Plus: fresh details on Rocket's Q1 purchase pipeline & how the Compass-Rate JVs are strategizing. We also share details on a mixed quarter for Blend (get it?). This edition is mostly for paid subscribers. Here’s a link to receive a 10% discount.

Here’s the TL;DR of the complaint: A company founded by 3 non-veterans allegedly uses deceptive marketing to trick veterans into believing they are dealing with the VA itself. Lots of American flags 🇺🇸 ; social media posts bragging that it’s the #1 lender for veterans & then burying disclaimers in small, low-contrast text. The suit says VU also prominently displays paid military advisors in its ads, which “further blurs the line between Veterans United and the VA."

From there, VU allegedly uses an illegal kickback & steering scheme w/ a network of 5K outside real estate agents. Agents must give back 35% of their commission to Veterans United Realty on closed deals; a lack of participation turns off the lead spigot. None of this is disclosed to the homebuyer, the suit says. 

In witness statements, LOs allege that VU loans carry higher rates & fees, often created by a “bait-and-switch” scheme in which VU quotes a cheaper floating rate but locks at a higher rate after the appraisal so the borrower feels like they can’t say no.  

Confidential Loan Officer #7, a broker in the Mid-Atlantic, supplied two redacted VU loan estimates from the same borrower, three days apart:

Looking at aggregate market rates over the same three-day window, the market actually improved by about 2.41% (a 6.5% loan got cheaper, & a 6.75% loan started generating credits). On those market metrics, VU should have offered the borrower a credit of roughly $3,210 on a 6.75% loan. 

But instead, the borrower paid $3,140, which is a swing of about $6,350 against the borrower despite a more favorable market. CO7's view is that lender costs between two estimates that close together should be quite similar, & this gap can't be explained by market movement. CO7 suggests the initial estimate carried artificially thin margins that were padded back in at lock.

The amended complaint also alleges inadequate appraisals (multiple plaintiffs report major post-purchase property defects), refusal to participate in state down-payment grant programs, & refusal to transfer VA appraisals to competing lenders.

VU told me that the amended complaint “adds volume & hyperbole, not substance. We intend to vigorously defend ourselves from these meritless claims.” A spokesperson said that VU & Veterans United Realty have “never held themselves out as the VA or any other governmental agency.”

“Our name was never a problem until a class-action attorney needed it to be. We frequently tell our customers that we are not a government agency or part of the VA, & we appreciate the plaintiff’s class-action attorneys identifying in the complaint more than a dozen examples of where we do so.”

The spokesperson added that VU rejects the inflammatory “bait-and-switch” characterization & said VU takes transparency seriously. 

“Our goal is to educate borrowers clearly, communicate honestly and offer them an amazing experience. Any suggestion that we intentionally mislead customers about rates or anything else is simply false.”

I’ve shared a copy of the amended complaint below 👇

I can’t speak to the merits of the case, but I absolutely see a lot of brokers & lenders out there using deceptive tactics to exploit veterans. A guaranteed, easy-to-qualify-for loan product creates a pretty target-rich environment for unscrupulous lenders, particularly when victims trust anything labeled “veteran” or “military.” The VA & CFPB have repeatedly warned about look-alike solicitations, especially for IRRRLs.

I often hear from frustrated LOs whose clients get texts from assholes purporting to be from the VA. The mortgage industry needs to do better, & there needs to be real enforcement.

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We highlighted Rocket’s top-level Q1 financial performance in Thursday’s special edition, but today I want to focus on Rocket gaining traction w/ purchase.