Wholesale and correspondent mortgage lender and service company Home Point Capital, Inc., which has a track record of investing in the reverse mortgage industry, is cited in a class action lawsuit alleging that the organization made false and inappropriate statements prior to its initial public offering. (IPO) earlier this year, in violation of federal securities laws.
This is reported by the international law firm Pomerantz LLP, which has filed a lawsuit in the US District Court for the Eastern District of Michigan. The relevant court documents were obtained by the RMD.
“The complaint alleges that the proposal documents were prepared carelessly and, as a result, contained false statements of material facts or did not contain other facts necessary to ensure that the statements made were not misleading and were not prepared in accordance with the rules and provisions governing training, ”the law firm said in a statement that largely echoes the exact wording of its complaint to the court.
In particular, Pomerantz brings individual charges against Home Point: the aggressive expansion of the lender’s broker partner – an estimated 88% annual growth rate – has sharply increased the company’s expenses; that the mortgage industry expects industry-wide margins to decline as a result of interest rate hikes in 2021, and Home Point will be subject to the same “competitive pressure.”
In addition, the lawsuit alleges that the company exaggerated its business and financial prospects; and that the prepared IPO documents “were materially false and / or misleading and did not contain information that should be included in them,” the complaint says.
Last month, following the announcement of first-quarter 2021 financial results, Home Point’s revenue reportedly fell short of consensus estimates of more than $ 41 million, leading to a drop in the share price of about 17.7%, according to the complaint.
“At the time of filing this complaint, Home Point’s share price was still trading below $ 13 per share, damaging investors,” the complaint said. “Plaintiffs and other members of the Panel suffered significant losses and damages as a result of the wrongful actions and inaction of the Defendants, as well as the sharp decline in the market value of Home Point securities.”
Home Point has yet to publicly respond to the suit’s availability at the time of posting. Last Monday, presiding judge Laurie J. Michelson filed a subpoena for the company.
Home Point owns a stake in the leading reverse mortgage lending company Longbridge Financial and first entered into a partnership with the company at the end of 2016, making it the attachment while a reverse mortgage lender teamed up with Ellington Financial.
Next year Home Point sold own reverse mortgage business for Michigan-based Huron Valley Financial, which has transformed Home Point’s former reverse mortgage business into its own 1st Nations reverse mortgage business. Subsequently, 1st Nations Reverse was acquired from University Lending Corp in 2019.