Before the acquisition by Mr. Cooper was completed in August, Home Point Capital agreed to settle for $5 million a class action lawsuit filed in 2021 by investors claiming the company made false and misleading statements related to its initial public offering (IPO).
The settlement follows Home Point Capital’s decision to sell the origination business to The Loan Store on April 7, 2023, exiting the mortgage lending business entirely. On May 10, Home Point Capital – at that point, a mortgage servicing rights shop – announced it was selling the company to Mr. Cooper Group for $324 million in cash, which resulted in the company shutting down.
Plaintiff Abdulaziz Jamal Johar Al-Johar settled on behalf of other class members with Home Point Capital Inc. and its top executives, including former CEO Willian Newman and former CFO Mark Elbaum. The settlement is pending approval in a U.S. district court in Michigan.
Home Point Capital and other defendants denied violating the federal securities law despite the agreement. According to them, the settlement eliminates risks and costs inherent in any litigation.
In the lawsuit, investors alleged that documents associated with Home Point’s initial public offering on January 29, 2021, included “false and misleading statements,” for example, that the company’s wholesale mortgage lending operations were low-cost and highly efficient.
Moreover, investors claimed that the offering documents “misleadingly omitted Home Point’s expectation that interest rates would increase and adversely affect the company’s wholesale margins.”
When Home Point announced its first quarter of 2021 earnings on May 6, 2021, it showed “disappointing margin and cost results,” according to the lawsuit. Ultimately, the company’s stock price, which debuted with a share price of $13, fell nearly 18% on May 6.
The court dismissed all allegations relative to interest rates and their impact on margins and profitability, further holding that several allegedly misleading statements about costs were “non-action puffery.”
However, on June 29, the parties executed the agreement, which was filed in court on September 15. Per the document, the settlement agreement reaches persons who acquired Home Point common stock in the IPO or after but before June 21, 2021, and were alleged to be damaged.