Lawsuit alleges Rocket Mortgage inflates FHA ratios, overcharges thousands on insurance

Under HUD’s framework, a borrower whose LTV comes in at 90% or below at closing pays FHA mortgage insurance for 11 years. Go above 90%, and you pay for the life of the loan – potentially 19 extra years of premiums. HUD’s handbook, the governing mortgagee letter, and the disclosure form that borrowers sign at application all define the relevant figure the same way: the loan amount before any financed upfront premium is added. The statute and regulation say the same thing.

Rocket, the lawsuit claims, does the opposite. It uses what it calls a “Servicing LTV” that folds the financed premium back into the numerator. Because most FHA borrowers finance that upfront premium – Rocket itself has said it “is standard for FHA loans to have the UFMIP financed into the loan” – the suit says this math pushes thousands of borrowers who closed at or just below 90% over the line.

The story behind the numbers

The named plaintiff bought his home in West Sacramento in November 2021 with an FHA loan from Home Point Financial Corporation. His base loan amount was $589,500 against an appraised value of $655,000 – exactly 90.0000%, according to the filing. He financed a $10,316 upfront premium, bringing his total note amount to $599,816. His closing disclosure projected mortgage insurance for “Years 1-11” and none after that. His monthly payment was set to drop from $3,780.06 to $3,390.65 once the insurance fell off.

When Rocket took over servicing after acquiring Mr. Cooper in October 2025, the borrower says he discovered Rocket was treating his insurance as payable for 30 years, not 11. The filing alleges Rocket divided his total loan amount of $599,816 by the $655,000 appraised value, arriving at a “Servicing LTV” of 91.57%.

Rocket’s own letters, according to the suit, laid both sides of the gap on the table. A February 2026 letter listed his “Base loan amount: $589,500.00 (which is 90% of your home’s value),” then added the upfront premium to get to 91.57%. A December 2025 letter said the “loan would have had a 90% LTV if the loan did not include the PMI and used the amount of $589,500.00.”