Newrez and OneTrust settle explosive trade secrets suit

Newrez and OneTrust Home Loans, a d.b.a. of CalCon Mutual Mortgage LLC, after slinging accusations back and forth, have opted to settle litigation pegged against one another.

In February, Newrez filed a bombshell suit alleging James Hecht, former head of its retail operations, staged a ruse in which he transitioned to OneTrust and brought his colleagues with him. Meanwhile, OneTrust accused Newrez of attempting to smear its reputation via legal action in a countersuit.

Terms of the settlement were not disclosed, but both pieces of litigation have been dismissed with prejudice, documents filed Sept. 11 in Pennsylvania federal court show. That means the same claims can't be tried again in court.

According to LinkedIn, Hecht, since being hired in February, is still the CEO of OneTrust.

Newrez confirmed the case was settled and noted there is a confidentiality agreement in place. OneTrust declined to comment Wednesday.

Litigation from both sides was kicked off after Newrez accused Hecht of firing a handful of Newrez managers and later rehiring them at his new place of employment. The alleged scheme took place shortly after Newrez announced a recommitment to its retail business after plans to sell it numerous times did not materialize.

Newrez also accused OneTrust Home Loans of conspiring with Hecht in this alleged plot. The lender sued for breach of contract, misappropriation of trade secrets and tortious interference with existing contracts.

In a countersuit, OneTrust claimed Newrez's goal was to "harm OneTrust's standing and reputation in the industry and vindictively lash out against its former employees." Some of the harm has allegedly already been done, as OneTrust said it has run into problems recruiting new employees since February, with "several prospective employees [declining] employment with OneTrust based on [statements made by Newrez] and at least one OneTrust employee [leaving] OneTrust based on these statements," the company said.

OneTrust's filing also delved into what was unfolding inside of Newrez prior to Hecht's departure in February, painting a picture of a frenzied workplace where next strategic moves were up in the air.

Specifically, the complaint mentions Newrez had a "love and hate relationship with retail lending" and attempted to sell its channel twice, once in the fall of 2023 and another time in early 2024, with Hecht allegedly finding a top-10 mortgage company ready to purchase the business.

Both times the deals fell through because Michael Nierenberg, CEO of Rithm Capital, parent company of Newrez, allegedly changed his mind.

Newrez publicly reaffirmed its recommitment to growing retail earlier this year. The mortgage lender is "100% committed to the distributed retail channel," an executive said Feb. 1.

The company's latest earnings show it funded $14.6 billion worth of loans in the second quarter, with a majority of $11 billion coming through its correspondent channel.