Mortgage

LoanDepot slams CrossCountry in poaching go well with

LoanDepot is suing CrossCountry Mortgage for raiding its New York workforce, slamming the lender for its alleged history of poaching and theft of trade secrets.

At least 32 loanDepot employees bolted for CrossCountry since February, taking with them thousands of confidential documents, according to the complaint filed Wednesday in the Southern District of New York U.S. District Court. The mortgage giant is accusing CrossCountry of seven counts including unfair competition. It is also seeking an injunction for former staff from using alleged stolen information and a probe of their personal devices as well as CrossCountry’s corporate systems. 

“The common denominator in nearly all of these actions is CrossCountry Mortgage, an institution which, at the urging of its CEO Ronald Leonhardt, has adopted tortious interference, aiding and abetting, and theft of trade secrets as core corporate principles,” wrote Josh Greenblatt, an attorney with New York-based Kirkland & Ellis LLP, on behalf of loanDepot.

It’s the fourth such lawsuit loanDepot has filed against the Brecksville, Ohio lender since 2018, while seven other mortgage firms have filed eight similar complaints against CrossCountry in the past four years.

A representative for loanDepot declined to comment on active litigation and CrossCountry didn’t respond to messages seeking comment.

The workers poached from Manhattan, Brooklyn and Fishkill, New York branches accounted for $846 million of loan per year on average and approximately 81% of the volume achieved by loanDepot’s New York operations in the past year, the lawsuit said. Some former staff allegedly began working at CrossCountry the same day of their departure and stalled prospective borrowers until they could convert their business to CrossCountry.

Scott Bonora, a former loanDepot area manager, and Rick Martino, a former loan consultant, copied over 10,000 documents between them on a USB external storage device before departing, the suit alleged. It claims Bonora researched loanDepot’s 2018 lawsuit against CrossCountry over its raiding in New Jersey. He eventually departed in March and 11 of his deputies later joined him.

In one incident, Bonora asked to retrieve a cornhole game for his vacation home from the Manhattan office on Sunday, March 6, and spent several hours alone before departing, never taking the cornhole game with him, loanDepot said. Other employees copied documents to USB drives, sent files to personal email accounts while another impermissibly installed DropBox on his work computer to access files from his personal devices, according to the complaint.

Public mortgage data revealed CrossCountry used loanDepot’s confidential information to convert its former customers into CrossCountry borrowers, the firm claimed. LoanDepot said CrossCountry’s signing bonuses and additional bonuses incentivized employees to not only leave but take with them confidential information to originate new loans with former customers quickly.

The activity was encouraged by Leonhardt, who allegedly texted loanDepot’s National Director of Business Development last July that he was offering CrossCountry recruiters a $50K bounty for every branch they could co-opt. 

The lawsuit accused CrossCountry of directing its $400 million loan facility led by Ares Management Corporation last November toward poaching efforts, citing a quote from one of the funders referring to the lender’s “organic and inorganic growth strategy.” 

LoanDepot in April won a temporary injunction in an Illinois federal court preventing CrossCountry from engaging in identical conduct. It claimed CrossCountry failed to agree to a similar agreement in the New York case. 

“At this point, it is clear that CrossCountry is willing to absorb such litigation and injunctive relief as a cost of doing (illegal) business,” the suit said. 

Other lenders that have sued CrossCountry for similar accusations since 2018 include AnnieMac, Caliber Home Loans, Freedom Mortgage, Guaranteed Rate, Guild Mortgage and Homeside Financial. CrossCountry fired back at Guild in May, suing the San Diego-based lender itself for possessing CrossCountry information.

The lawsuits over employee poaching come at a difficult time for the industry beset by mass layoffs. LoanDepot earlier this week said it’s cutting 4,800 positions as part of a three-year plan to respond to the cooling mortgage market.

Related Articles