Former mortgage staff allege lenders stiffed them on paychecks
April 24, 2023 5:00 AM
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 ofmass 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.
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
"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.
Understanding the law
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 partiallycovered 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.
LOs are partially
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.
Major market players under fire
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.
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.
To settle or not to settle
Of the 27 FLSA complaints against lenders in the past year, 12 have closed under various circumstances. While a few plaintiffs have voluntarily dismissed their complaints, at least five mortgage professionals have reached settlements with their former employers. The agreements are usually confidential, and both companies and attorneys are hesitant to discuss them.
In one rare publicly available settlement,Better.com in March pledged to pay a former mortgage underwriter $14,000, including $7,000 in back wages and $7,000 in liquidated damages, after she sued the lender last January in a Florida federal court for its alleged failure to pay overtime. Counsel for the former underwriter didn't respond to requests for comment.
Cases from individual plaintiffs are most likely to be settled, Valli said, while companies will also attempt to settle with an individual behind a class action case to prevent wider litigation.
Failed lender Sprout Mortgage and its former parent company Recovco Mortgage Management have allegedly reached a settlement with 125former workers seeking owed back pay , according to a court filing last week. Counsel did not comment on the case and a judge has ordered an update on the settlement by Tuesday, while the amount of damages sought remains unknown.
An even larger class of former mortgage professionals is seeking millions of dollars in a legal battlewith shuttered firm First Guaranty Mortgage Corp. , for wages they alleged were lost because of the company's abrupt shutdown without notice. That case also remains pending.
In one rare publicly available settlement,
Cases from individual plaintiffs are most likely to be settled, Valli said, while companies will also attempt to settle with an individual behind a class action case to prevent wider litigation.
Failed lender Sprout Mortgage and its former parent company Recovco Mortgage Management have allegedly reached a settlement with 125
An even larger class of former mortgage professionals is seeking millions of dollars in a legal battle
Bigger accusations, bigger sums in question
Sprinkled among the compensation complaints from LOs are other alleged violations. A former Wells Fargo mortgage loan processor, who sued the bank in a Pennsylvania federal court for FLSA violations, is also accusing the company of retaliation based on religious beliefs, related to the plaintiff's hesitance to take a COVID-19 shot.
CrossCountry Mortgage, which has been involved inseveral poaching accusation battles , is facing some of the most severe accusations among the crop of FLSA complaints. Paul Lundholm, a former CCM employee, sued his former employer in February for allegedly failing to pay him a minimum wage.
The lawsuit filed in an Ohio federal court claims the lender had a scheme in which it would have new hires agree to a sign-on bonus, known as an "unvested wage advance," which workers had to pay back if they left the company for any reason within a two-year period. As the market slowed, the commission-based employees didn't make money and CCM would then sue to get the sign-on bonus back, it said.
"In our view they were trying to shift all the risk of the turn of the market onto these individuals," said attorney Brendan Sweeney of The Law Office of Christopher Q. Davis, PLLC in New York City, on behalf of Lundholm,previously told National Mortgage News .
The amount in question is $81,371.83, according to the lawsuit. Three additional former CrossCountry employees have filed FLSA suits against the firm, while CCM itself has countersued Lundholm in federal court. CrossCountry's attempts to recoup sign-on bonuses extends to an Ohio state court, where it's sued over three dozen former employees for the five- and six-figure sign-on sums, earning default judgments against former loan officers in some of the cases.
CrossCountry's attorney didn't respond to repeated requests for comment, while the firm cited its policy of not commenting on litigation. Attorneys for Lundholm declined to comment further, as they recently filed a motion challenging CrossCountry's move to compel arbitration.
"CrossCountry easily could have guaranteed them at least a minimum wage payment in the weeks that they weren't closing loans," said aid attorney Anthony Lazzaro of Moreland HIlls, Ohio-based The Lazzaro Law Firm, LLC, on behalf of Lundholm. "The law is not hard to comply with but they definitely were not complying with the law in this case."
CrossCountry Mortgage, which has been involved in
The lawsuit filed in an Ohio federal court claims the lender had a scheme in which it would have new hires agree to a sign-on bonus, known as an "unvested wage advance," which workers had to pay back if they left the company for any reason within a two-year period. As the market slowed, the commission-based employees didn't make money and CCM would then sue to get the sign-on bonus back, it said.
"In our view they were trying to shift all the risk of the turn of the market onto these individuals," said attorney Brendan Sweeney of The Law Office of Christopher Q. Davis, PLLC in New York City, on behalf of Lundholm,
The amount in question is $81,371.83, according to the lawsuit. Three additional former CrossCountry employees have filed FLSA suits against the firm, while CCM itself has countersued Lundholm in federal court. CrossCountry's attempts to recoup sign-on bonuses extends to an Ohio state court, where it's sued over three dozen former employees for the five- and six-figure sign-on sums, earning default judgments against former loan officers in some of the cases.
CrossCountry's attorney didn't respond to repeated requests for comment, while the firm cited its policy of not commenting on litigation. Attorneys for Lundholm declined to comment further, as they recently filed a motion challenging CrossCountry's move to compel arbitration.
"CrossCountry easily could have guaranteed them at least a minimum wage payment in the weeks that they weren't closing loans," said aid attorney Anthony Lazzaro of Moreland HIlls, Ohio-based The Lazzaro Law Firm, LLC, on behalf of Lundholm. "The law is not hard to comply with but they definitely were not complying with the law in this case."
