Mortgage
Federal judge dismisses ERISA class action against United Wholesale Mortgage
By Real Estate Wire Staff, . Real Estate Wire.
A federal judge has dismissed a class action complaint against United Wholesale Mortgage over the management of its employee retirement plan, according to National Mortgage News. U.S. District Judge Susan K. DeClercq ruled this week in favor of United Wholesale Mortgage, rejecting claims brought by former account executives who alleged the company violated the Employee Retirement Income Security Act, the federal law governing private-sector retirement plans.
The core dispute, as National Mortgage News reported, was over how United Wholesale Mortgage handled forfeitures: unvested employer contributions left behind by employees who departed before their funds fully vested. The plaintiffs argued the company used those forfeitures to fund future employer contributions rather than to cover the plan's administrative expenses, and that this choice cost plan participants a collective $1,857,731. Judge DeClercq questioned the plaintiffs' math, noting they did not explain how they arrived at that figure.
The judge's ruling turned on whether ERISA required United Wholesale Mortgage to apply forfeitures in a specific way. It did not, she found. As National Mortgage News quoted from the 20-page ruling: "ERISA does not transform the Plan's discretionary choice into a fiduciary breach merely because another permissible choice could have produced a greater economic benefit for participants." The plan's own language gave management discretion over how to deploy those funds, and exercising that discretion, even in a way that benefited the company, did not constitute a breach.
National Mortgage News reported that United Wholesale Mortgage's 401(k) plan covered more than 7,000 participants and held more than $149 million in assets at the end of 2023. The company matches 50 percent of the first 3 percent of employee contributions, capped at $2,500 per year, and matched $8 million in total contributions in 2024, up from $6.4 million the prior year.
The case was resolved at a relatively early stage, which matters for how the industry reads it. ERISA class actions in the mortgage sector have a mixed track record: some drag on for years, and some produce meaningful settlements. National Mortgage News noted that plaintiffs secured a $650,000 settlement last year against Republic Mortgage Insurance Company over separate investment-oversight allegations, with a final hearing scheduled for next month. Meanwhile, Onity and Wells Fargo remain in litigation over ERISA claims first filed in 2018, claims that survived a 2023 ruling on fiduciary duties only to be sent back for further proceedings by an appellate court earlier this year.
Against that backdrop, the United Wholesale Mortgage dismissal is notable for two reasons. First, it resolves cleanly and early, sparing the company the prolonged discovery and reputational exposure that has followed other mortgage servicers. Second, the ruling's logic, that plan administrators have genuine discretion over forfeiture allocation unless the plan document says otherwise, gives other employers a clearer line of defense if similar suits follow.
The forfeiture question is not unique to United Wholesale Mortgage. A number of large employers across industries have faced comparable claims in recent years, and the legal landscape around how forfeitures must be applied remains unsettled in some circuits. Whether the plaintiffs appeal is not yet known; National Mortgage News reported that the attorney for the former employees did not respond to an inquiry on that point. If they do not, the ruling stands as a clean win. If they do, the appellate outcome could carry weight well beyond this one plan.
Source: https://www.nationalmortgagenews.com/news/judge-sides-with-uwm-in-tossing-employees-401k-lawsuit