Former mortgage staff allege lenders stiffed them on paychecks

As mortgage lenders continue to shed staff, former employees are accusing them of bad behavior during last year's difficult market. 

Dozens of loan officers and other staff have sued home lenders in federal court for allegedly failing to pay them overtime, and in some cases, minimum wages. Over two dozen suits in the past 12 months have accused firms including industry leaders of violating state and federal wage statutes, according to a review of court records by National Mortgage News.

The complaints include repercussions from a prolonged stretch of mass layoffs, which mortgage professionals also claim were handled poorly. While it's unclear if the new wave of lawsuits are coming at an outsized pace, a correlation with the market's decline is possible, according to one veteran industry attorney.

"Anytime you see a downturn in the economy affecting any industry lending or anything else for that matter, you do see a spike in these types of claims," said Ari Karen, partner and head of Litigation, Labor and Employment at Mitchell Sandler. 

Sandler represents one mortgage firm in a still-pending wage lawsuit from a former loan officer. Some lenders have moved to settle lawsuits with individual plaintiffs, while the majority of lenders, such as Rocket Mortgage, have pledged to defend themselves from the complaints.

The lawsuits from LOs all accuse companies of violating the Fair Labor Standards Act, a Great Depression-era law mandating minimum wage and overtime compensation requirements by employers. Per the FLSA, recited in each of the lawsuits, employers must compensate workers for each hour worked, along with overtime pay equal to 1.5 times the regular rate of pay every hour worked beyond 40 hours per week.

LOs are partially covered by the law under a key ruling by the U.S. Supreme Court in 2015, and lenders have been periodically hit by lawsuits in recent years, including United Wholesale Mortgage, which paid a $2.75 million settlement last spring. Individual states also have their own wage laws, such as New York's decade-old Wage Theft Prevention Act.

Many workers are surprised to learn about their rights under state and federal wage laws while many employers don't comply with them, said Robert J. Valli Jr., founding partner of Garden City, New York-based Valli Kane & Vagnini LLP. Valli has represented a mortgage banker and underwriter in two separate suits against mortgage lenders in the past two years.

"I don't think it's intentional," said Valli, referring to employers not following the laws. "And there is no intent requirement in the law. It's just, 'this is how we do business, and we don't provide that,' but it turns out that's illegal."

Larger lenders are more aware of the labor laws and have developed structures to address them, Karen said, but smaller companies may not be focused on the issue until they are hit with a lawsuit.

The biggest companies in mortgage lending are also defendants in FLSA suits. Companies who've faced multiple wage complaints in the past year include CrossCountry Mortgage, Fairway Independent Mortgage Corp., Rocket Mortgage, and Freedom Mortgage, among other bank and non-bank lenders. 

Mortgage bankers are continually opting into one collective action against Rocket Mortgage in a suit filed in January in the U.S. District Court for the District of Arizona. Ten Arizona and Michigan-based ex-employees, who worked at Rocket between last February and October, claim the megalender failed to pay them overtime.

"Defendant knew that – or acted with reckless disregard as to whether – their refusal or failure to properly compensate Plaintiffs and the Collective Members over the course of their employment would violate federal law, and Defendant was aware of the FLSA overtime requirements," wrote attorney James Weiler on behalf of the plaintiffs. 

Weiler didn't respond to requests for comment. Rocket has refuted the claims, calling them baseless in a recent statement.

"This case started as simply a desperate, last-minute attempt by a group of former employees who knowingly and willingly violated the terms of their employment with our company and are already party to pending litigation," a company spokesperson said. "We are confident that our mortgage bankers' overtime is calculated correctly and we will ultimately be vindicated."

Like most of the wage complaints, the Rocket suit doesn't describe a dollar amount sought for damages, nor dives into further detail about the failure to pay wages.

Amy Edmonston, a former licensed loan originator assistant and Fairway, described in a federal suit the lender's failure to pay overtime for her regular 60 to 70 hours worked per week. She claims a former Pennsylvania-based branch manager told her to underreport her hours worked until she left the company last June.

Attorneys and Fairway didn't respond to requests for comment, and a case filing in March indicates the parties have agreed to pursue a solution in arbitration.