Even in a downturn, the loan officer recruiting wars remain fierce. Beleaguered nonbank lender loanDepot is suing rival lender CrossCountry for allegedly dozens of poaching high-performing loan officers from its New York branches. They’re at least the third lender to sue CrossCountry for poaching over the last two years.
The lawsuit, filed in federal court in New York last week, alleges that since February 2022 “CrossCountry improperly poached no fewer than 32 loanDepot employees from loanDepot branches in Manhattan, Brooklyn and Fishkill, New York by interfering with loanDepot’s contractual and other legal rights.”
Employees who left for CrossCountry accounted for about 81% of the loan volume generated by loanDepot’s New York operations in the past year, the suit said.
“CrossCountry’s focus on loanDepot’s New York operations is hardly surprising” as loanDepot’s New York branches produced an average of $846 million of loans in volume annually, loanDepot said in court filings. Some employees worked at loanDepot for more than 10 years before leaving for CrossCountry, loanDepot alleged. The lawsuit said that other loanDepot employees plan to leave the lender to join CrossCountry.
loanDepot accused CrossCountry of breach of contract, violating the trade secrets act, interfering with contracts and unfair competition, among other claims.
The accusations come amid loanDepot’s pledge to cut 4,800 jobs in 2022 to return to profitability. loanDepot reported a net loss of $91.3 million in the first quarter of 2022, with origination volume falling significantly due to a sharp rise in rates.
Poaching allegedly started on Feb. 23 when Michael Secor, a loan consultant, and defendant Emeline Ramos, Secor’s production assistant, abruptly resigned. Nine loan consultants and three managers followed them over the next two weeks, the lawsuit claimed. (Secor, Ramos and 10 others were named as defendants in the lawsuit.)
Since then, CrossCountry recruited 18 additional loanDepot employees including loan consultants, managers and production assistants, loanDepot claims.
The lawsuit claims that former employees took “valuable loanDepot trade secrets” and “proprietary customer information” when they left for CrossCountry and that Cross Country is actively using this information to capture loanDepot business and customer relationships.
loanDepot alleges Cross Country’s CEO Ron Leonhardt is willing to “absorb such litigation and injunctive relief as a cost of doing (illegal) business” and even offered to pay a $50,000 bounty to anyone who is able to co-opt an entire loanDepot branch.
To help fund a strategy of “employee raiding,” CrossCountry raised $400 million in outside funding in November 2021, which Leonhardt crowed at the time that the financing positions CrossCountry for growth as it “expand our platform, geographical footprint and residential mortgage offering,” the lawsuit said.
loanDepot declined to comment citing ongoing litigation and CrossCountry didn’t respond to requests for comment.
Guild Mortgage and Caliber Home Loans have both sued CrossCountry on similar grounds. Caliber, now a part of New Rez, said CrossCountry had snagged 80 top-producing LOs who originated $2.3 billion in business. In October 2021, Guild Mortgage sued CrossCountry for allegedly engaging in similar practices.
loanDepot also sued seven former loan officers from the Meredith-Rogers team in September for joining CrossCountry and allegedly transferring loans in the pipeline to their new employer.
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