loanDepot
has
been
challenged
in
court
since
its
IPO.
The
lender

prevailed
in
a
case
brought
by
former
chief
operating
officer
Tammy
Richards,
who
claimed
discrimination
after
blowing
the
whistle
on
what
she
called
illegal
practices.
It
also
settled
a

lawsuit
from
shareholders,
who
claimed
that
executives
made
false
or
misleading
disclosures
before
and
after
the
IPO. 

In
the
new
case,
the
plaintiffs
are
borrowers
from
Maryland,
Virginia
and
Florida
who
obtained
mortgages
from
loanDepot
between
September
2019
and
June
2021.
The
lawsuit,
filed
on
Monday,
is
in
a
district
court
in
Maryland. 

The
plaintiffs
detail
how
loanDepot
allegedly
required
LOs
who
couldn’t
push
higher-cost
loans
to
“transfer”
the
borrower
to
an
internal
loan
consultant.
None
of
the
plaintiffs’
loans
were
transferred
to
these
ILCs,
so
they
paid
higher
rates
and
fees.  

But,
according
to
them,
the
internal
transfer
was
a
fiction
as
the
ILC
assumed
no
additional
duties,
the
original
LO
continued
to
perform
the
same
duties
and
loanDepot
“electronically
robosigned
the
ILC’s
signature.”
These
transfers
were
justified
with
false
reasons
like
“customer
request”
on
internal
forms,
the
lawsuit
claims.

The
lawsuit
further
alleges
that
if
an
LO
truthfully
documented
the
reason
for
the
transfer
—
such
as
securing
a
lower
rate
for
the
borrower
—
they
received
no
commission.
But
if
they
falsified
the
reason
using
one
of
several
preapproved
justifications
outside
of
their
control,
they
were
still
paid,
albeit
at
a
reduced
rate.

According
to
the
complaint,
loanDepot
consequently
punished
LOs
with
reduced
commissions
if
they
failed
to
close
loans
at
inflated

rates,
and
the
company
eliminated
compensation
entirely
if
LOs
didn’t
falsify
documentation
to
conceal
the
activity.

“Beginning
in
and
around
2019,
loanDepot
began
instituting

compensation
plans
that
required
LOs
to
charge
an
inflated
interest
rate/fees
to
borrowers,”
the
lawsuit
claims.
“If
LOs
could
not
obtain
the
borrowers’
consent
to
move
forward
with
those
terms,
loanDepot
would
reduce
the
borrowers’
rate
and/or
fees
but
punish
the
LO
by
reducing
their
compensation
or
eliminating
it
altogether.” 

The
alleged
practices
would
constitute
violations
of
the
Dodd-Frank
Act
and
its
implementing
rules,
including
the


Consumer
Financial
Protection
Bureau
(CFPB)’s
Regulation
Z.
These
rules
prohibit
the
compensation
of
LOs
based
on
loan
terms
other
than
the
amount
of
credit
extended
—
a
reform
designed
to
curb
predatory
practices
that
contributed
to
the
2008
financial
crisis.

Borrowers,
according
to
the
lawsuit,
were
routinely
steered
into
more
expensive
loans
by
LOs
under
pressure
to
offer
the
highest
pricing,
and
who
faced
financial
penalties
for
failing
to
do
so
or
for
not
falsifying
the
required
documentation.

As
of
Thursday,
loanDepot
had
1,642
sponsored
loan
officers,
per
the

Nationwide
Multistate
Licensing
System
(NMLS).
On
average,
LOs
are
compensated
100
basis
points
(1%)
of
the
loan
amount,
according
to
the
lawsuit.

The
plaintiffs
estimate
loanDepot
originated
approximately
$300
billion
in
mortgages
during
the
time
of
the
alleged
scheme.
They
are
suing
under
the
Truth
in
Lending
Act
and
allege
additional
violations
including
wire
fraud,
securities
fraud
and
conspiracy.

The
suit
seeks
repayment
of
interest
and
fees
on
affected
loans.