$5M settlement between shareholders and Home Point approved

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.