In a pair of rulings, the U.S. Circuit Court of Appeals for the District of Columbia has rejected the National Association of Realtors petition for a rehearing in its case with the Justice Department.
The latest actions follow a 2-1 split decision that allowed the Biden Administration to reopen a case the trade group thought it had settled while Donald Trump was president.
But the Biden Administration never finalized the agreement and looked to reopen the investigation.
“This ruling stands in opposition to years of precedent on the interpretation of government contracts and the bedrock principle that the government must honor its word,” a NAR spokesperson said. “We are evaluating all remaining legal options and are committed to exploring all avenues to ensure the DOJ is held to the terms of our 2020 agreement.”
Some speculated that the April ruling could lead to more involvement by the Justice Department in cases involving real estate broker commissions and multiple listing services activities. Most recently, the Department filed an amicus brief, albeit in support of neither side, calling on Ninth Circuit Court of Appeals to reopen a case filed by Real Estate Exchange, also known as REX, against NAR and Zillow.
NAR has also entered into settlement agreements with some of the various plaintiffs in the buyer’s real estate broker fee commission cases, with a number of observers speculating that it wouldn’t have taken the action without the Justice Department’s blessing. But the DOJ’s actions since then have dispelled that conjecture.
After the April decision came out, NAR filed an appeal asking for both a rehearing among the three judge panel that initially decided the matter, as well as for an en banc hearing, where all members of the court would then rule on the case.
Both motions were rejected in single-page rulings without detailed explanation.
“Upon consideration of appellee’s petition for panel rehearing filed on May 20, 2024, it is ordered that the petition be denied,” wrote the unanimous three-judge panel consisting of Judge Karen Henderson, Judge Justin Walker and Judge Florence Pan.
The entire court, with the exception of Judge Bradley Garcia, participated in the unanimous ruling denying NAR’s request.
“Upon consideration of appellee’s petition for rehearing en banc, the response thereto, and the absence of a request by any member of the court for a vote, it is ordered that the petition be denied,” the unsigned ruling said.
The Appraisal Foundation has settled the “secretary-initiated” complaint with the Department of Housing and Urban Development over fair lending practices, including creating a $1.22 million scholarship fund.
HUD’s press release describes the conciliation agreement as historic, resolving a complaint “alleging discriminatory barriers preventing qualified Black people and other persons of color from entering the appraisal profession on the basis of race in violation of the Fair Housing Act.”
The Appraisal Foundation’s announcement about the settlement emphasized that the investigation process started in December 2021 did not result in any findings.
“We are pleased to have reached this conciliation agreement,” recently appointed Appraisal Foundation President Kelly Davids said in the group’s press release. “We appreciate HUD’s recognition of our proactive efforts to lead the appraisal profession to welcome a new, diverse generation of appraisers and their support of our forthcoming scholarship program to aid new entrants to the field.”
HUD’s comments focused on the lack of diversity in the appraisal profession and the Foundation’s role in that, namely its experience requirement, where a friend or family member who is already a licensed appraiser has to be willing to supervise as the applicant gains on-the-job experience.
“The lack of diversity within the appraiser workforce can contribute to patterns of mis-valuation in communities of color,” HUD press release quotes the Interagency Task Force on Property Appraisal and Valuation Equity as commenting. It cites Bureau of Labor Statistics data that states the industry is 94.7% white.
Yet the agreement declares “Respondent denies that the Appraiser Qualification Criteria has caused or resulted in any violation of the Fair Housing Act, but agrees to enter into this Conciliation Agreement to conclude the Investigation.”
It has a three-year term, set to expire on July 9, 2027.
“To help eliminate racial and ethnic bias from home appraisals, we must ensure that the industry looks like America,” HUD Acting Secretary Adrianne Todman said in the agency’s release.
“Today’s historic agreement will help build a class of appraisers based on what they know instead of who they know. This settlement will help bring us one step closer to rooting out discrimination in housing and opening doors to opportunity for all,” she added.
Under the agreement, the Foundation is creating a $1.22 million scholarship fund, which will cover the cost of aspiring appraisers to attend Practical Applications of Real Estate Appraisal programs, an alternative pathway to fulfill the experience requirement.
Details, including eligibility and how to apply, will be shared when the program is formally announced, the Foundation press release said.
The Appraisal Foundation has been in the crosshairs of the head of another member agency of the Federal Financial Institutions Examination Council, Director Rohit Chopra of the Consumer Financial Protection Bureau.
Chopra penned a letter after the PAVE report came out in March.
“These issues are deeply troubling as the Appraisal Foundation is one of the most — if not the most — powerful players in America when it comes to appraisals and plays a controlling role in key issues contributing to appraisal bias,” Chopra wrote. “As long as the Appraisal Foundation remains an insular body controlled by a small circle, operating behind closed doors, those issues will continue to go unaddressed.”
A Michigan federal judge gave a final nod to a $5 million settlement, putting to rest a shareholder suit against Home Point Financial, three years after it was first filed.
Of the sum, the lead counsel will receive 30% of the proceeds, or $1.5 million, Shalina Kumar, U.S. District Judge in Michigan ruled June 28.
The settlement was announced in September of last year but took close to a year to get the green light.
The class action lawsuit, lodged by shareholders, accused Home Point of making misleading statements regarding its business strategies and how the unfolding lending environment could impact it as it was set to go public.
Specifically, the class action accused the now defunct lender of omitting information in its filings with the Securities and Exchange Commission regarding how its expansion of broker partners could increase the company’s expenses and how an industry-wide decrease of gain-on-sale margins would impact it.
This was “negligent” on behalf of Home Point and due to it and “the precipitous decline in the market value of Home Point’s securities, plaintiffs and other class members have suffered significant losses and damages,” the original complaint filed June 21, 2021 said.
Judge Kumar, the federal judge on the case, wrote in her ruling that the settlement “delivered a favorable recovery for the class,” especially with the looming uncertainty around Home Point’s financial viability last year.
Home Point opted to sell off its wholesale business to The Loan Store, a national entity based in Tucson, Arizona, in April 2023. Four months later, the company’s servicing operation was acquired by Mr. Cooper. The defunct mortgage lender was a casualty of deteriorating economics of the mortgage industry, which resulted in its demise, analysts have said.
In announcing the initial settlement last year — prior to the judge’s current approval — over 9,988 potential class members were contacted, all of whom could potentially receive a small chunk of the proceeds pie.
The case has been dismissed with prejudice, provided that the court retains jurisdiction over all matters relating to the administration of the settlement, the judge wrote in her ruling.
Other lenders that went public during this same time period, including Loandepot and Rocket Mortgage, have faced similar accusations lodged by shareholders.
Loandepot settled one such suit in May, with a California judge granting final approval to a $3.5 million settlement accusing the lender of misleading investors prior to its initial public offering.
Meanwhile, Rocket Mortgage investors have pushed for a federal Michigan court to certify their class action lawsuit, which accuses the mortgage giant of misleading shareholders regarding the company’s financial health in 2021. The suit has been pending for over three years.
The U.S. Supreme Court placed new restrictions Thursday on the use of in-house judges in regulatory enforcement cases — a watershed decision that’s expected to benefit both banks and individual bankers in situations where their regulators have accused them of wrongdoing.
Following the 6-3 decision, many enforcement cases that federal agencies would otherwise bring in administrative law courts — where, defendants frequently argue, the regulators have a homefield advantage — will likely have to be filed in federal court. The Seventh Amendment of the U.S. Constitution enshrines the right to a jury trial in certain situations.
The ruling by the high court’s conservative majority grew out of a fraud case that the Securities and Exchange Commission filed against the founder of a hedge fund. But it has large implications for a wide range of federal agencies.
In the banking sphere, the Federal Deposit Insurance Corp, the Federal Reserve, the Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau all use administrative law judges.
Some of the clearest consequences of the ruling in the banking realm, experts said, will involve cases where regulators are seeking civil monetary penalties from either banks or individuals. Those cases will now have to be brought in federal court.
David Zaring, a professor of legal studies and business ethics at the University of Pennsylvania’s Wharton School, noted that many enforcement cases are settled rather than go to trial. He said that the prospect of a costly fight in federal court could give additional leverage to defendants who are engaged in settlement talks with regulators.
“Federal court litigation is expensive, and that could weigh into the leverage defendants have when thinking about whether to settle cases involving civil monetary penalties,” Zaring said.
He cited three examples of the kinds of cases where the defendants likely would have had a stronger hand to play in settlement talks if the Supreme Court’s ruling Thursday had already been in effect.
Under that scenario, securities fraud cases that were brought against big banks after the 2008 financial crisis, anti-money-laundering cases that resulted in large banks paying penalties and cases involving bank employees’ use of unauthorized messaging apps, might have been resolved on more favorable terms for the banks, Zaring said.
The penalties in those settlements have often stretched into the hundreds of millions of dollars, if not more than $1 billion.
The implications of Thursday’s ruling are less clear for enforcement cases that do not involve civil money penalties, according to experts.
Banking agencies may bring cases, for example, seeking restitution or the disgorgement of ill-gotten gains. They may try to bar individuals from working in the banking industry. They may also seek an order that a specific bank needs to cease and desist from certain conduct.
An enforcement case involving disgorgement could still go before an administrative law judge, Zaring said Thursday, based on his reading of the Supreme Court’s decision.
David P. Weber, a former enforcement official at the OCC, the FDIC and the SEC, agreed with that interpretation of the court’s decision. But he added that provisions of the Federal Deposit Insurance Act giving bank regulators the ability to bring cases not involving civil money penalties before an administrative law judge will also likely be challenged in court.
“I’m sure that intrepid litigants are now going to challenge all of the provisions,” said Weber, who is now a professor at Salisbury University’s Perdue School of Business.
Weber also pointed to another difficulty the ruling causes for bank regulators. He said that existing federal laws do not enable the banking agencies to bring certain types of enforcement cases — for example, those alleging that a bank engaged in unsafe and unsound practices — in federal court.
If the courts now take the position that such cases have to be brought in federal court, rather than before an administrative law judge, Weber said: “Until Congress provides a fix, it may be very difficult for federal banking agencies to bring enforcement actions.”
Weber was critical of the Supreme Court’s decision, arguing that administrative law judges have expertise about banking that federal judges lack.
Defense lawyers are typically far more critical of administrative law judges and the rules of the administrative law system, which lack certain procedural protections that federal courts provide to defendants.
“From my perspective as a defense lawyer, I generally prefer to be before a federal jury than an administrative law judge,” said Brad Bondi, a trial attorney at Paul Hastings.
Bondi said that the Supreme Court’s decision Thursday restored a pillar of American justice, which is that defendants who face an SEC penalty are entitled to a jury trial.
“This is a landmark decision that has broad ramifications across other government agencies that use administrative proceedings,” he said.
The court’s opinion was written by Chief Justice John Roberts and joined by Justices Clarence Thomas, Samuel Alito, Neil Gorsuch, Brett Kavanaugh and Amy Coney Barrett.
“A defendant facing a fraud suit has the right to be tried by a jury of his peers before a neutral adjudicator,” Roberts wrote.
In a concurring opinion, Gorsuch, who was joined by Thomas, wrote that the close relationship between administrative law judges and the agencies that bring enforcement cases makes it difficult, if not impossible, to convey the image of impartiality.
“Yes, ALJs enjoy some measure of independence as a matter of regulation and statute from the lawyers who pursue charges on behalf of the agency. But they remain servants of the same master — the very agency tasked with prosecuting individuals …” Gorsuch wrote.
In a fiery dissent, Justice Sonia Sotomayor accused the court’s conservative majority of engaging in a “power grab” by “arrogating Congress’s policymaking role to itself.” She wrote that the constitutionality of hundreds of federal laws may now be in jeopardy, and that dozens of agencies could be stripped of their power to enforce laws that Congress has passed.
“The majority pulls a rug out from under Congress,” Sotomayor wrote in an opinion joined by Justices Elena Kagan and Ketanji Brown Jackson, “without even acknowledging that its decision upends over two centuries of settled government practice.”
The Supreme Court on Friday overturned a major legal precedent requiring judges to defer to federal regulatory agencies’ interpretation of ambiguous statutes. The 6-3 ruling reduces the power of a wide range of executive branch agencies, including bank regulators, to interpret laws.
The 40-year-old legal doctrine — known as Chevron deference, named for the 1984 Supreme Court decision in Natural Resources Defense Council v. Chevron establishing the precedent — had long frustrated companies in regulated industries because it limited their ability to sue agencies over their interpretations of broad or vague legal authorities.
The doctrine often meant that regulators could write broader, more costly rules than regulated companies believed were warranted. Its demise is expected to open the floodgates to a wave of litigation challenging such rules.
But the end of Chevron deference could be a double-edged sword for banks, according to industry lawyers, because the Supreme Court’s decision will also make it easier for advocacy groups and state attorneys general to challenge rules they oppose, which would introduce more uncertainty for banks.
The ruling by the high court’s conservative majority, written by Chief Justice John Roberts, held that the Administrative Procedure Act requires courts to exercise their independent judgment in deciding whether an agency has acted within its statutory authority. Courts have the option to defer to an agency’s interpretation of an ambiguous law, but the court said the firm requirement that it must is incorrect.
“The deference that Chevron requires of courts reviewing agency action cannot be squared with the APA,” Roberts wrote. “Perhaps most fundamentally, Chevron’s presumption is misguided because agencies have no special competence in resolving statutory ambiguities. Courts do.
“Chevron has proved to be fundamentally misguided,” he continued in an opinion joined by Justices Clarence Thomas, Samuel Alito, Neil Gorsuch, Brett Kavanaugh and Amy Coney Barrett. “And its flaws were apparent from the start, prompting the Court to revise its foundations and continually limit its application. Experience has also shown that Chevron is unworkable.”
The court’s decision encompassed two cases: Loper Bright Enterprises v. Raimondo and Relentless v. Department of Commerce. The cases involved fishermen in New Jersey and Rhode Island who claimed the National Marine Fisheries Service could not impose a fee requiring federal observers on herring boats, based on the applicable law.
In a dissenting opinion, Justice Elena Kagan wrote that for 40 years, Chevron deference has served “as a cornerstone of administrative law, allocating responsibility for statutory construction between courts and agencies.”
“This Court has long understood Chevron deference to reflect what Congress would want, and so to be rooted in a presumption of legislative intent,” wrote Kagan, who was joined by Justice Sonia Sotomayor. “Congress knows that it does not — in fact cannot — write perfectly complete regulatory statutes.”
Justice Ketanji Brown Jackson joined the dissent in one of the two cases but was recused from the other because she took part in it as a federal appeals court judge.
Banking trade groups reacted favorably to the court’s ruling.
“This is an important win for accountability and predictability at a time when agencies are unleashing a tsunami of regulation — in many cases clearly exceeding their statutory authority while making it harder for banks to serve their customers. We will continue to fight to ensure that bank regulators follow the law every time they exercise their powers,” the American Bankers Association said in a written statement.
Going forward, lawyers said, federal agencies will be under greater scrutiny, giving industry actors more opportunities to challenge agency rules and interpretations of the law.
“The decision could be viewed as putting regulated communities on a more equal footing with the agencies,” said Varu Chilakamarri, a partner at the law firm K&L Gates.
Eugene Scalia, a former Trump administration Labor secretary and prominent corporate litigator, said that the Supreme Court’s decision on Friday is part of a broader trend in which courts are applying more scrutiny to agencies’ exercise of their legal authority.
Scalia has been hired by the Bank Policy Institute, which represents the nation’s largest banks, to advise on potential legal challenges to a Federal Reserve proposal for higher capital standards that has drawn fierce pushback from the industry.
He said Friday that “all regulators are wise to be more careful than they’ve been” in recent years “to make sure they’re acting within the authority Congress gave them, and they’re giving thoughtful consideration when the public tells them what its concerns are.”
The stakes appear to be particularly high for the Consumer Financial Protection Bureau. The CFPB has a reputation as being more aggressive than some other federal agencies, and during the Biden administration, the bureau has found its rules routinely challenged in court.
The CFPB said Friday that it is reviewing the ruling and declined to comment.
The CFPB’s interpretations of laws will now be subject to “heightened attack,” said Joe Lynyak, a partner at Dorsey & Whitney.
“Courts around the country may be inundated with private parties who may now litigate and relitigate an agency interpretation, including creating conflicting decisions by lower courts,” Lynyak said.
Eamonn Moran, senior counsel at Norton Rose Fulbright, said the rollback of Chevron deference may result in the overturning of regulations such as the CFPB’s $8 credit card late fee rule. But he also cautioned about potential downsides for banks.
“While there may be now more opportunity for the plaintiff’s lawyers to try to undo regulations through court challenges, industry may now be faced with lack of predictability and compliance challenges,” Moran said.
Leah Dempsey, co-chair of the financial services practice at the law firm Brownstein Hyatt Farber Schreck, pointed to what she described as challenges for regulated companies stemming from the court’s decision, in addition to the opportunities.
In an interview before the decision was released, Dempsey said that companies are always looking for clarity on how to operate, and argued that the demise of Chevron could limit the ability of agencies to provide such clarity.
Kate Judge, a professor at Columbia Law School, wrote in a social media post that banks, like many businesses, “may see Chevron’s fall as a win, but the Chevron doctrine was central in facilitating deregulation.”
“The result today does not mean less regulation; it just ensures more uncertainty about the obligations the law imposes on regulated entities,” Judge wrote on X, formerly known as Twitter.
The National Community Reinvestment Coalition is one of the progressive groups that may become more aggressive in suing over regulations it dislikes. The group’s chief policy counsel, Eden Forsythe, predicted that in the wake of Friday’s decision, “cynical corporate lobbyists” will try to undermine important regulatory safeguards.
“We can’t let that become a one-sided fight. If the courts are declaring open season on regulatory decision-making, then we have to make sure corporate America aren’t the only ones fighting,” Forsythe said. “Where regulatory outcomes have not been good enough to protect our communities, economic and environmental justice organizations should be aggressive in pursuing positive change.”
Joann Needleman, an attorney at the law firm Clark Hill, noted that many laws that affect the financial services sector are decades old, so they don’t provide clear guidance about how companies may use newer technology. It has long been up to regulators to fill in those gaps.
Needleman said that following the demise of Chevron deference, she can foresee litigation by consumer advocates challenging regulations that CFPB established regarding the use of modern communications technologies by debt collectors. The CFPB’s 2020 rule implementing the Fair Debt Collection Practices Act addresses the use of email and text messages by debt collectors. Advocates have opposed parts of the regulation.
Needleman, who is a former president of the board of directors of the National Creditors Bar Association, said in an interview before the court’s decision was released that the CFPB’s rule provides a modern interpretation of a decades-old law.
“A lot of what the CFPB did around that regulation was really helpful,” she said.
United Wholesale Mortgage is asking a Michigan federal court to throw out a class action suit that accuses it of orchestrating a scheme in coordination with brokers to cheat borrowers “out of billions of dollars in excess fees and costs.”
The suit was filed by four borrowers following an explosive report by Hunterbrook Media in April. The venture capital-backed outlet claimed UWM holds independent brokers captive via its All-In Initiative and overcharges borrowers by preventing brokers from shopping around for clients. UWM has vehemently denied the accusations.
Subsequent litigation alleged UWM violated a number of laws including the Racketeer Influenced and Corrupt Organizations Act (RICO) and the Real Estate Settlement Procedures Act (RESPA).
In its motion to dismiss, the wholesale giant calls all of the allegations “meritless” and an attempt to “smear United Wholesale Mortgage, LLC (“UWM”), its affiliates, and even its CEO — all of which serves to benefit market speculators.”
“This Hunterbrook-affiliated lawsuit is a putative class action that raises a kitchen-sink full of claims against UWM, its holding companies, and its CEO,” the motion states.
It further picks apart all of the claims made against it.
The wholesale giant says the suit has failed to plead its racketeering claims, and does not demonstrate the existence of an enterprise engaging in a pattern of such activity. Further, UWM argues that RESPA claims are subject to a one-year statute of limitations and that the time period for all class representatives has expired, making the claim void.
Lastly, UWM points out that the plaintiffs’ claims that it aided and abetted a breach of a broker’s fiduciary duty fail because “mortgage brokers are not per se fiduciaries.”
The attorney representing the plaintiffs did not immediately respond to a request for comment Monday.
UWM argues that contrary to the lawsuit’s statements, brokers use its services because they actually want to, not because they are being held captive. It points to its competitive rates and state-of-the-art technology, which makes for a reliable borrowing experience for customers as the reason why brokers opt to use its services.
It also states that while the complaint “tries to cast repeat business as something nefarious, it is an essential part of growing any business and the result of the unique value UWM provides — tireless customer service, cutting-edge technology, and unmatched speed and reliability,” UWM’s motion filed June 21 reads.
Additionally, the lender defended its ultimatum, adding that two federal courts in Florida and Michigan have thus far upheld its initiative, and its lock-in provision, which allows brokers to lock-in UWM’s rates prior to closing.
The original complaint, lodged by law firm Boies Schiller Flexner LLP, relies heavily on the assertion that UWM’s ultimatum has contributed to borrowers being deprived of cheaper loan options because brokers cannot freely shop around. UWM says this is not the case, as brokers are free to exit the wholesale agreement anytime following a seven day notice.
Regarding its lock-in provision, the wholesale lender says it’s at-will, something a broker can opt for or forgo.
Following Hunterbrook’s investigation and the racketeering lawsuit, industry stakeholders expressed concerns over how the allegations may impact broader customer sentiment about the industry.
Some have predicted the case could lead to more regulatory scrutiny of mortgage brokers, but that in the near-term the accusations alone will shake consumer confidence in home lenders and make borrowers reconsider working with mortgage brokers.
Others have questioned what Hunterbrook’s motives were in publishing such an investigation and asked whether it was ethical journalism. The parent company of Hunterbrook, prior to publishing the story, took a short position in $UWMC, a long position in $RKT, and purchased derivatives at undisclosed amounts.
Amid the unfolding litigation, UWM remains the dominant wholesale lender in the nation.
The Detroit-area lender earned $108.5 million in the first quarter of 2024, compared with losses in the fourth quarter of $461 million and $138.6 million during the first quarter of 2023. Total volume of $27.6 billion included $22.1 billion in purchase loans.
Looming changes to real estate commissions are already causing ripple effects in mortgage lending.
The National Association of Realtors will implement new rules this summer, following a $418 million settlement to end lawsuits challenging broker commissions. Four major real estate players also agreed to massive settlements in the past year, paving the way for a new landscape for homebuyers, home sellers and their representatives.
Housing finance stakeholders, who held their breath through the legal proceedings, are beginning to respond to the changes affecting borrowers. While the government has already amended one rule to protect certain consumers, other concerns regarding affordability and blurred lines between Realtors and loan officers remain.
Here’s the latest on what you need to know about real estate agent commissions.
A former loan processor at Crosscountry Mortgage has accused the lender of discouraging employees from reporting overtime pay.
The plaintiff, Christina Nielsen, claims management informed her and others they could not record any overtime hours worked and that when overtime hours were reported, Crosscountry’s management “refused to record any hours over 40 worked in a workweek,” the suit filed in a Georgia federal court said.
If the company did do so, it would be a violation of the federal Fair Labor Standards Act, which mandates minimum wage and overtime compensation requirements by employers. Other lenders, including LendUS and Rocket Mortgage, have been accused of similar practices.
This is not Nielsen’s first complaint against the company, as a year prior the former employee accused her former CCM branch manager of sexual assault. This particular case is still pending in court as of June 18.
According to the recent overtime suit, Crosscountry required Nielsen and other nonexempt branch employees to work unpaid overtime as a condition of employment.
The complaint points out in February 2022 Nielsen’s job title changed to loan processor manager, but her job duties did not change as a result and she continued to perform nonexempt work. Under the FLSA, an employee must be paid one and one-half times their “regular rate” of pay for all overtime hours worked.
Nielsen, who worked for the company since 2018, was terminated in July 2022.
Nielsen wants the court to certify this suit as a class action and seeks actual and liquidated damages, interest, and reasonable attorneys’ fees and costs for defendants’ failure to pay her.” The exact amount was not disclosed.
Crosscountry did not immediately respond to a request for comment.
A separate refi-boom era suit is also pending against Crosscountry accusing it of failing to cover employee remote work costs.
The complaint accuses the mortgage lender of violating an Illinois state law, which protects workers from wage-related issues, the suit lodged May 3 in a federal court in Illinois, claims. The plaintiff, April Shakoor, who worked at Crosscountry from 2019 to 2020, says the mortgage shop imposed certain requirements such as high speed internet for remote work, but did not pay employees back for the expenses. She is asking the court to certify the suit as a class action.
Alleged violations of workers rights, including the FLSA, have been rampant in recent years. Most recently, Rocket Mortgage has moved to settle such a case for $3.5 million.
The suit, originally filed in January 2023 by a group of loan officers, accused the megalender of violating the Fair Labor Standards Act by failing to compensate them for all hours worked.
Despite moving to quash the suit, Rocket “denies and continues to deny the allegations contained in the plaintiffs’ lawsuit or that it violated any federal, state or local law, breached any duty, failed to pay any employees as required by law,” the company’s filing said.
In the last few weeks, readers had their attention trained on updates in mortgage-related court cases, developments in AI and notable actions of government agencies.
Here are the recent most-read stories from National Mortgage News you may have missed.
These articles were reported by Brad Finkelstein, Bonnie Sinnock, Maria Volkova, Andrew Martinez, and Spencer Lee, with additional writing from Courtney Hoff Dockerty.
Newrez is asking a Pennsylvania federal court to throw out OneTrust Home Loans’ recent counterclaims.
The two lenders have been sparring via legal filings following the departure of James Hecht, former head of production at Newrez, and a handful of executives to OneTrust in the first half of the year.
Newrez has accused Hecht, OneTrust’s CEO, of being a mastermind behind an elaborate ruse to raid employees from the Pennsylvania-based company and steal trade secrets.
In response to Newrez’s litigation, OneTrust accused Newrez of unfair competition, tortious interference with contract, and defamation. Specifically, Newrez has made it hard for OneTrust to recruit future employees, the San Diego-based company claims.
The lender in its counter complaint also alleges that Newrez has had a “love and hate” relationship with its retail channel, which it purportedly tried to sell twice.
Newrez notes in a filing June 5 that OneTrust has “failed to state any claim upon which relief can be granted.”
It also added that over 70 Newrez employees (and counting) have actually transitioned to OneTrust since the departure of Hecht and others, which has resulted “in substantial loss to Newrez.”
“OneTrust lobs unwarranted allegations of wrongdoing premised on Newrez bringing this lawsuit against OneTrust and vague, speculative allegations of defamation against Newrez,” the recent filing reads.
The mortgage lender goes on to take apart the claims made by its competitor, noting the “counterclaims contain conclusory allegations of unlawful conduct but lack any…factual substance.”
OneTrust’s unfair competition claim depends greatly on Newrez filing the suit against it, alleging it was done for improper purposes and to unfairly compete against it. Newrez’s recent filing argues this “is not the type of conduct that supports an unfair competition claim [in Pennsylvania.]”
Additionally, OneTrust’s tortious interference of contract claim alleges Newrez is “preventing the departure of Newrez employees who seek better job opportunities with OneTrust.” But the Pennsylvania-mortgage lender and servicer argues this claim “consists of nothing more than conclusory allegations and fails to specifically identify what contracts — existing or prospective — with which Newrez allegedly interfered.”
Newrez does admit, however, that around February 2024 OneTrust entered an employment contract with a former Newrez employee. She was going to be a manager but ultimately opted to not work at OneTrust because of fear of litigation.
“This individual resigned her position with OneTrust, and, instead, joined a competing mortgage servicer,” the filing says.
Joshua Eskine, founder of OneTrust Home Loans, said in a statement Thursday the company fully stands behind the “facts and claims we set forth.”
“[We] will forcefully respond to Newrez’s baseless motion in due course in the litigation where the truth as we explained it will prevail.”
Meanwhile, a spokesperson for Newrez said the company does not “comment on active litigation.”
“However, this filing reiterates our commitment to protecting our company’s interests, values, and reputation, and we will vigorously pursue all legal remedies available to us,” he added.
Earlier this year, Newrez reasserted its dedication to retail with an executive noting that it is “100% committed to the distributed retail channel.” They also highlighted that “connecting our servicing portfolio and our servicing leads on a localized basis is really the differentiator on how we connect with our customers.”
Speaking of servicing, Newrez finalized the acquisition of Computershare Mortgage Services and affiliate Specialized Loan Servicing LLC in early May.
Real estate investment trust Rithm Capital Corp, parent company of Newrez, bought the company for close to $720 million as a means to further expand its servicing presence.
The integration of Computershare adds $149 billion in unpaid principal balance to the company. This includes $104 billion in third-party servicing to Newrez’s portfolio, the company said in a recent press release
The New York-based company posted net income of $261.6 million, equivalent to 54 cents per share in the first quarter. The mortgage originations and servicing segment at Rithm, the parent company of Newrez, brought in $311.9 million in net income during the quarter as loan production and fair value of MSRs both improved.