Wholesale and correspondent mortgage lender and servicer Home Point Capital, Inc., which has a history of investing in the reverse mortgage industry, has been named in a class-action lawsuit which alleges the organization made false and improper statements ahead of an Initial Public Offering (IPO) early this year that amounts to violations of federal securities laws.
This is according to international law firm Pomerantz LLP, which filed the suit in the U.S. District Court for the Eastern District of Michigan. Relevant court documents were obtained by RMD.
“The complaint alleges that the offering documents were negligently prepared and, as a result, contained untrue statements of material fact or omitted to state other facts necessary to make the statements made not misleading and was not prepared in accordance with the rules and regulations governing its preparation,” the announcement by the law firm reads, echoing much of the exact text of its complaint filed in court.
Specifically, Pomerantz makes separate allegations against Home Point: that an aggressive expansion of the lender’s broker partners – estimated at an annualized growth rate of 88% – dramatically increased the company’s expenses; that the mortgage industry was anticipating industry-wide decreased margins as a result of rising interest rates in 2021 and Home Point would be subject to identical “competitive pressures.”
Additionally, the suit alleges that the company overstated its business and financial prospects; and that prepared documents related to the IPO “were materially false and/or misleading and failed to state information required to be stated therein,” the complaint reads.
Last month after announcing its Q1 2021 financial results, Home Point’s revenue reportedly missed consensus estimates by more than $41 million, which caused the stock price to fall an estimated 17.7% according to the complaint.
“At the time this Complaint was filed, Home Point’s stock price has continued to trade below the $13.00 per share Offering price, damaging investors,” the complaint reads. “As a result of Defendants’ wrongful acts and omissions, and the precipitous decline in the market value of Home Point’s securities, Plaintiffs and other Class members have suffered significant losses and damages.”
Home Point has yet to publicly respond to the presence of the suit as of press time. A summons was issued to the company by presiding Judge Laurie J. Michelson this past Monday.
Home Point owns an equity interest in leading reverse mortgage lender Longbridge Financial, first beginning its association with the company in late 2016 by making its investment in the reverse mortgage lender alongside Ellington Financial at that time.
The following year, Home Point sold its own reverse mortgage lending arm to Michigan-based Huron Valley Financial, which folded the former Home Point reverse division into its own 1st Nations Reverse Mortgage arm. Subsequently, the 1st Nations Reverse team were hired by University Bank’s subsidiary, Midwest Loan Solutions, Inc. as part of a deal with Huron Valley Financial in 2019.
A previous version of this article incorrectly described the 2019 deal between 1st Nations Reverse employees and Huron Valley Financial. RMD regrets the error.
