Rocket Faces “Refi Lawsuit” with Fraud, TILA Claims

Note: “Rocket” is presumed innocent (legal disclaimer) until proven otherwise.

This is my third cycle of boom or bust for interest rates  – and it should be obvious to everyone that the “Corporate Lending Industry” is a short-term business model beholding to their stockholders. 

Covid and Superbowl ads have replaced MLOs at real estate board meetings and caravans. 

There’s no substitute for an experienced and readily available MLO and real estate agent for closing “sales” transactions on weekends, holidays, and after “normal business hours”. 

Does anyone remember the first FinTech lender: Countrywide Home Loans? Not so much? Now the “corporate grift” has moved on to (allegedly) CFPB investigations for kickback/steering; more on that in coming posts!

The following is from an edited post from HousingWire.com – April 19,  2023

Rocket Faces Refi Lawsuit with Fraud, TILA Claims

In an amended complaint, two couples — John Speicher and his wife, Patricia Giles, from Wyomissing, Pennsylvania, and Jeremy and Courtney Speicher from Concord, North Carolina — allege that Rocket created a “bait-and-switch” scenario in which the lender gave the borrowers a lower rate initially but terminated the application to offer a higher rate instead.

The incident in question dates to March 2022 when mortgage rates were still relatively low. 

The couples claim in the lawsuit that after receiving and signing a disclosure form that locked in a $647,000 loan at 3.99% for a fixed 30-year mortgage, the lender ceased contact for two weeks after the expected closing date. 

The lawsuit alleges that Rocket then told the couples that the mortgage process was terminated due to a lack of activity on the file for three weeks and offered to have them re-apply for a higher rate of 5.5%. 

“Defendant’s (Rocket Morgage’s) true motivation was to avoid selling 30-year mortgage at 3.99% for $647,200 when the rates had dramatically increased to 5.5% in March and April of 2022,” the suit said.

The couples initially sued the lender in October 2022 on seven counts, including breach of contract, negligence and fraud.

However, the couples filed an amended suit after a ruling by Judge Joseph Leeson, Jr. of the U.S. District Court for the Eastern District of Pennsylvania

Of the seven initial allegations, the federal judge dismissed in his ruling three claims with prejudice, two others without prejudice, and denied two other accusations.

However, the applicants were allowed to file an amended claim if they wished to replead to the counts that had been dismissed with prejudice within seven days of the ruling. 

The applicants are demanding in the lawsuit that Rocket pay for the difference of the interest rate of 3.99% for a 30-year fixed mortgage versus the 5.5% interest rate offered by the lender; punitive damages; reasonable counsel fees, interest and costs of the proceeding.

The amended lawsuit now includes four different claims of fraud, negligence, violations of the Truth in Lending Act , and violations of the Pennsylvania Unfair Trade Practices Act.

In his ruling, Judge Leeson said that terminating the mortgage process is not a breach of contract and lenders do not owe a duty of care to borrowers. 

However, according to the ruling, the mortgagors provided sufficient facts for their fraud and unfair trade practice claims.

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“Because they allege that Rocket Mortgage knowingly misrepresented that plaintiffs would receive a 3.99% interest rate, plaintiffs relied on that representation, and their reliance on that representation resulted in a financial loss,” Judge Leeson said in the ruling.

Rocket’s response:

A spokesperson for Rocket Mortgage said the company is confident that the case will be dismissed.