Homepoint suing correspondent lenders over repurchases

A large mortgage company on the verge of shutting down is trying to collect over $4.6 million from correspondent lenders it says failed to cure or repurchase loans with various defects. 

Attorneys for Homepoint are already attempting to secure defaults against two of the seven lenders it's sued in a Michigan federal court as it seeks to enforce their correspondent agreements. The company says 10 separate loans failed to meet government-sponsored enterprise guidelines for a plethora of reasons including delinquencies and misrepresentations.

"This is not uncommon in the industry and it is not uncommon for recovery efforts to result in the initiation of litigation," wrote Neal Bailen of Jeffersonville, Indiana-based Stites and Harbison PLLC on behalf of Homepoint, in a statement this week. "We continue to work with our client Home Point on these matters."

Homepoint recites its correspondent agreement in each lawsuit, in which it requires lenders to fulfill a repurchase request within 10 business days. The plaintiff nor any of the seven originators it's suing responded to requests for comment this week. 

The company sold its wholesale business to The Loan Store in April and is awaiting the completion of an acquisition by fellow industry giant Mr. Cooper. It also posted a $133.8 million net loss in the first quarter, its last earnings report since it went public in 2021.

The firms it is suing are AHL Funding; AmRes; Continental Mortgage Bankers; Fidelity Direct; Lending 3; Loan Factory and Trans United. Each company is accused of failing to repurchase a six-figure loan, while Trans United allegedly owes Homepoint a combined $1.7 million across three loans. The lawsuits were filed in the U.S. District Court for the Eastern District of Michigan between January and June, with five submitted this month. 

In a suit against AmRes, Homepoint alleges a loan it bought from the firm last March in Miami violated Freddie Mac guidelines because it was in a condominium hotel and because it's involved in a safety lawsuit. The property is listed as a unit at the Aria at the Bay complex, where the developers are facing a county court complaint over alleged construction defects, according to a report by The Real Deal. It's unclear if the property is on the GSE's list of nonwarrantable condo properties.

Homepoint was forced to repurchase that loan from Freddie Mac at an undisclosed time, according to the lawsuit. The lender then asked AmRes to cure or repurchase the mortgage and it failed to respond. The lawsuit seeks $500,113.20 from AmRes excluding interest and attorneys fees, and a summons to the company was issued Tuesday. 

Other non-complaint GSE loans Homepoint repurchased were denied for reasons including incorrect appraisals; insufficient borrower assets; delinquencies including one loan more than 4 months overdue; an insufficient debt-to-income ratio; and alleged income and employment fraud.

A court clerk has entered defaults against AHL Funding and Lending 3 for $523,630.26 and $752,401.63, respectively, after they failed to respond to the lawsuits. The companies haven't responded to the actions in court.

Other lenders have sued brokers and lending partners for failing to repurchase loans, including Rocket Mortgage, which has filed several such lawsuits against companies in the past six months. 

The Community Home Lenders of America has called for the GSEs to indemnify rather than force agency sellers to repurchase loans, which leads them to sell the mortgages at discounts in the scratch-and-dent market. The organization estimates an average of a 30% per loan loss on each repurchase.