A mortgage lender is suing Better Home & Finance for allegedly stealing its retail lending operation through a poaching and theft of trade secrets scheme.
Luminate Home Loans asked a judge last week to impose a temporary restraining order to prevent Better from building its retail business with employees and data from Luminate's former Neo Home Loans division. The lender's complaint filed earlier this month seeks $10 million in actual damages, which attorneys asked to triple, and punitive damages of at least $50 million.
The lawsuit in a California federal court names three ex-Neo leaders as defendants, including division president Daniel Horanyi. The lender said it began tracking Neo leaders' work devices in October after it learned they were meeting with competitors about leaving. The monitoring revealed they were sharing trade secrets with Better and intended to take Neo to the rival, which is solely a direct-to-consumer lender, according to court documents.
Luminate fired Neo leadership on Oct. 25 and began transitioning over 200 employees to other areas of its business. The mortgage arm of Minneapolis-based Luminate Bank announced at that time it planned to clos Neo by February 2025 for business reasons,
In a statement last week, Lucas Markowitz, a partner at Mitchell Sandler representing Luminate, said Better crossed the line of fair competition.
"The theft of Luminate's proprietary information and the systematic targeting of Luminate's team members to unfairly replicate its successes is not competition — it is corporate robbery," wrote Markowitz.
In a statement Sunday, a Better spokesperson said the company does not comment on active litigation, but it is excited about the Neo team addition.
"We believe this partnership will unlock further customer efficiencies by combining Better's AI technology and robust digital lead funnel with deep, local expertise and relationships," the statement read.
Neither Luminate nor Horanyi returned requests for comment. Better has yet to respond to the lawsuit with an attorney in court.
Luminate bought Neo from the
As Luminate learned of Neo leaders' talks with competitors, it used the Teramind monitoring system, allowed by terms of employment, to investigate their digital activity.
The monitoring captured Neo leaders sharing numerous types of information with Better regarding their retail operations, according to the lawsuit. Among the information shared as early as August was the financial structure behind Neo, mortgage leads and files, and offer letters to employees. Better was aware its activity was illicit, Luminate claimed, citing what it said were steps the rival took to obfuscate its involvement.
Luminate's complaint includes numerous exhibits of digital screenshots aimed at showing what it characterized as scheming among defendants. More Luminate employees resigned to join Better earlier this month, and a former director of finance is also withholding confidential Luminate information on a flash drive, according to recent case filings.
In last week's motion for a TRO and preliminary injunction, Luminate asked a judge to prevent ex-Neo employees from working specifically on Better's retail business. The lender suggests Better can still compete fairly in retail and attract workers from other companies.
"Free and fair competition helped make Luminate the third fastest-growing private mortgage lender in the country up until defendants tried to seize that successful model for themselves," attorneys wrote.
A hearing on the motion is scheduled for Jan. 24.
Luminate originated over $2.7 billion in origination volume in 2023, sponsors 490 registered mortgage loan originators and counts over 64 active branches today according to publicly available data.
Better has 425 sponsored MLOs and generated just under $2 billion in loan volume in 2023. The company, which rapidly grew during the refinance boom, went public last August and recently posted its fifth consecutive quarterly loss.
