Class action suit lodged against Celebrity Home Loans

A class action complaint has been lodged against Oakbrook Terrace, Illinois-based Celebrity Home Loans for its "callous" decision to shutdown without giving employees a 60-days heads up, as required by the Worker Adjustment and Retraining Notification Act.

The suit, filed by Michael Blake, a former loan officer at CHL, also accuses the lender of failing to "timely pay full wages, commissions and final compensation owed," in violation of the Illinois Wage Payment and Collection Act.

The complaint alleges that executive officers "knew for weeks, if not months" that the company was going under and the breakdown of negotiations with Arizona-based On Q Financial Inc. — which was set to acquire parts of the company — "could lead to a mass layoff and closure of the company."

The case will be heard on June 27th by the Circuit Court of Cook County, Illinois County Department. Celebrity Home Loans, which is said to have closed $5.9 million in total mortgage origination volume last year, did not respond to a request for comment.

What transpired at CHL has been dubbed as "bizarre" by former employees. Documents filed on Feb. 24 provide a look into what unfolded at the lender's shop.

According to the litigation, on Feb. 13, three days prior to many employees' payday, the lender sent separation letters to "approximately 92% of its workforce, informing them that they were being terminated that same day." Employees were also allegedly informed via the letter that they would not be compensated for the pay period prior to termination.

Less than a week prior, upper management of CHL was informed that assets of the company, including the remainder of the company's production team, were going to be acquired by On Q Financial, according to employees impacted by the layoff. The following day, the same message was reiterated to a bigger audience by the company's CEO David Robnett.

According to a report from National Mortgage Professional, On Q Financial Inc. was also taken aback by Celebrity Home Loans' liquidity issues and was not aware of what was happening inside of the company that it was set to acquire.  Pat Lamb, a spokesperson for On Q, told the publication that the recent layoff put a wrench in the deal for On Q to acquire Celebrity's remaining assets.

The class action lawsuit seeks damages to the class members affected equal to the amount of "any unpaid or underpaid wages, salary, commissions, and final compensation along with damages of 5% of the amount of any such underpayments for each month during which such underpayments remain unpaid."

Since March 2022, the company has been downsizing its operations. However, former employees interviewed by National Mortgage News say that executives at the company were optimistic about the company's future. They were prepared to ride out the storm.

"The CEO and high level executives of the company always had very positive comments about the state of the company, but that was not the opinion shared by all," said one former employee impacted by the reductions in February. "There was definitely a disconnect in the conversations about what was really going on with the company. Obviously something was terribly wrong because the bottom doesn't fall out like this…this takes a long, long time."

CHL joins a handful of lenders, including Majestic Home Loan and Amerifirst Financial, that are accused of abruptly shutting down operations without giving employees much explanation.