LoanDepot Revamps Leadership as it Fights Steering Allegations

LoanDepot founder and CEO Anthony Hsieh has revamped the company’s executive ranks as the mortgage lender fights a lawsuit alleging that it incentivized loan originators to steer borrowers into loans with higher rates and fees — and cut their commissions to preserve profits if customers insisted on better deals.

The July 15 lawsuit seeks class action status to represent borrowers who have taken out more than $300 billion in loans from loanDepot since Jan. 1, 2019, while the loan officer compensation policy has allegedly been in place.

LoanDepot denies the allegations, calling them a “frivolous attempt to damage loanDepot’s reputation.”

“The plaintiffs are borrowers who received record-low rates many years ago,” a loanDepot spokesperson said in a statement to Inman. “They assert meritless claims relying on years-old, anonymous declarations that they have hidden from public view, through a lawyer who represented a competitor on the same meritless allegations years ago and lost.”

In their Sept. 12 motion to dismiss the case, attorneys for loanDepot maintained that the lawsuit does not specify how borrowers were injured or “name a single individual who allegedly participated in the ‘fraudulent scheme’ or identify a single instance in which a loanDepot employee made a fraudulent representation (on a form or otherwise).”

In an amended complaint filed on Oct. 3, attorneys representing four borrowers in Maryland and Virginia submitted internal company emails and screenshots of loanDepot’s loan origination system to bolster their claims that loanDepot deployed “a sophisticated, years-long scheme to systemically circumvent and conceal its willful violations” of loan officer compensation laws.

Loan officers can’t be rewarded for costlier loans

In the wake of the housing crash and Great Recession of 2007-2009, the Truth in Lending Act was amended to prohibit lenders from basing loan officer compensation on loan terms. During the runup to the housing crash, mortgage brokers and loan officers were often rewarded if their clients took out loans at higher interest rates than they might have qualified for.

LoanDepot typically signs agreements with loan officers that pay them 90 to 120 basis points of the balance of loans they originate, according to evidence and testimony in the case so far. But when loanDepot needs to make borrowers a better offer or risk losing a deal, loan officers might see their compensation cut to 30 basis points — or nothing if they don’t play along, the lawsuit alleges.

A basis point is one hundredth of a percentage point. So a loan officer originating a $338,000 mortgage (the size of a loan needed to buy a median-priced home with 20 percent down) would see their compensation cut from $3,380 (if paid 100 basis points) to $1,014 (if paid 30 basis points).

To cover its tracks in such instances, the lawsuit alleges that loanDepot pretended to transfer more competitive (and less profitable) mortgages to an “internal loan consultant” (ILC) in order to justify paying the loan officer who originated the loan less for their work.

LoanDepot has “implemented a system to falsify internal forms and federal disclosures to conceal the fact that it varied loan officer compensation based on the terms — interest rates and fees — of its mortgage loans,” the complaint alleges.

If loan officers did not go along by “falsifying these documents, loanDepot paid no commission at all,” giving its employees all the more incentive to steer borrowers into higher-cost loans, the complaint against loanDepot alleges.

“The testimony of multiple loan officers, loanDepot’s own corporate designee, emails from top executives, and publicly available screen shots from its loan origination system, demonstrate that not only were the transfers to ILCs a sham transfer, but they were also instituted in order to justify lower compensation when loanDepot need to reduce the rates and or fees on a loan to match a competitor,” the complaint alleges.

Attorneys for loanDepot have until Oct. 24 to respond to the amended complaint.

In their motion to dismiss the original complaint, loanDepot’s attorneys denied that the company’s transfers of loans to independent loan consultants (ILCs) are shams and said none of the loans taken out by the named plaintiffs in the case were subjected to such treatment.

The complaint against loanDepot also failed to disclose the “historically low rates they ultimately received on their loans or explain how much lower their rates could be, or should have been, absent loanDepot’s alleged misconduct,” attorneys for the company said.

“The bulk of the allegations in the complaint, which do not directly involve plaintiffs (consumers whose loans were never transferred), curiously mirror allegations previously raised and later dismissed by Movement Mortgage, LLC, a competitor of loanDepot, which was represented by the same lawyer,” loanDepot’s attorneys maintained.

(LoanDepot sued a competitor, Movement Mortgage, in 2023, accusing it of poaching its loan officers. Movement Mortgage countersued, and both companies agreed to drop the lawsuit last year, with each party covering its own costs.)

Evidence submitted in the case so far includes an agreement outlining a loan officer’s compensation plan, stating that in cases where a “permitted loan transfer” to an ILC was approved, the loan officers compensation would be reduced from 120 basis points to 30 basis points.

Loans could qualify to be transferred if the loan officer certified they were out of the office and needed assistance, or if the borrower put in a written request to work with another loan officer, for example.

But the lawsuit claims the real reason for transferring loans to ILCs was often because loanDepot needed to offer a more competitive rate, and it would make up for it by cutting its own loan officers’ compensation.

To support that argument, attorneys in the case submitted testimony from the Movement Mortgage case, in which loanDepot’s “corporate designee” — a spokesperson for the company — confirmed that executives would only approve requests for pricing exceptions after loans had been transferred to an ILC.

Screenshots for loanDepot’s Mello loan origination system show that loan officers understood they “would need to specifically highlight the transfer of a loan to an ILC when requesting a pricing exception for customers to match the lower rates that competitors offered,” the complaint said.

When a “large financial advisor” brought a $1.16 million loan application that they’d shopped with another lender, a screenshot from the Mello system shows a loanDepot National Production Manager John Bianchi signed off on a lower rate.

In another instance, a loan officer said a $308,000 loan was at risk because the borrower “Won’t stick with us unless we match broker at 2.875 percent.” In another, loanDepot was “competing against [Bank of America] on rate” for a $750,000 loan with a “multiple time past client.”

Bianchi, who left loanDepot in August, approved rate exceptions for all three loans, which paid the originating loan officer smaller commissions because they were “ILC deals” — they’d been transferred to internal loan consultants.

In an April 2021 email thread between loanDepot Regional Production Manager Brian Covey and Human Resources Director Michelle Alexander, a loan officer is told to submit a loan for an ILC transfer to obtain a pricing concession.

The ILC transfers were used specifically to match competitors’ pricing at the direction of loanDepot managers, an unnamed former loanDepot loan officer said in a declaration.

“While at loanDepot, there were instances where I was directed to transfer my loan to an Internal Loan Consultant to close the loan,” the declaration said. “My understanding was that this occurred when loanDepot was trying to match a competitor and the loan pricing was not profitable for the company with my compensation plan. In those instances, Brian Covey, my Regional Manager, would advise me that if I transferred the loan to an ILC, I would receive a lower referral commission and the company could make the deal. [M]y team still closed the loans and did the same amount of work they would have had it been my loan.”

Testifying under oath in the Movement Mortgage lawsuit, a former loanDepot loan processor said that when loans were transferred to ILCs for price concessions, the originating loan officer still had to do any additional work that was required, such as updating rate locks or talking to borrowers.

“[N]othing changed on the loan,” the loan processor testified. “We still worked with the same loan officer and the same loan officer assistants. It was a name. I really don’t know if it was a real person.”

Covey, who left Movement Mortgage to join loanDepot in 2018, worked there until December 2022 and now serves as a divisional senior vice president at CrossCountry Mortgage, according to his LinkedIn profile. Covey did not respond to Inman’s request for comment.

Executive suite overhaul

Hsieh, who founded loanDepot in 2009, stepped back into the CEO role on an interim basis in June with the departure of former CoreLogic CEO Frank Martell, who ran loanDepot for more than three years.

LoanDepot Founder and CEO Anthony Hsieh announces a naming rights deal for Miami’s loanDepot park in 2021. File photo by Mark Brown/Getty Images.

LoanDepot’s board elected Hsieh as permanent CEO on July 27 — 12 days after the lawsuit was filed — and he embarked on an overhaul of the company’s executive ranks, hiring or promoting 10 executives in the past three months.

Of the 14 executives currently featured on loanDepot’s corporate leadership web page, all but three were either recently hired or promoted by Hsieh or worked for him during his previous tenure as CEO.

• Hsieh kicked off the executive suite revamp on Aug. 5, hiring two technology executives — Dom Marchetti and Sean DeJulia — who he said were instrumental in scaling the company during its first decade of growth.
• On Aug. 8, loanDepot announced the promotion of Tom Fiddler to president of retail lending. Fiddler, who joined loanDepot in 2015 and had been serving as senior vice president of production for the East division, took over Bianchi’s responsibilities, the company said.
• Dan Peña, the head of loanDepot’s joint venture channel since 2015, was promoted to president of partnership lending at the same time.
• On Sept. 22, loanDepot announced the appointment of Adam Saab as executive vice president of servicing, and three days later, Mary Bain was promoted to serve as senior vice president of production for the Northeast/Central division.
• Alec Hanson, who joined loanDepot in 2011 when the company acquired imortgage and served as the company’s chief marketing officer for two years, was named senior vice president of production for the West division in September.
• The executive revamp has continued into October, with loanDepot announcing this week that Rick Calle, who had previously served as loanDepot’s chief strategy officer from 2016 to 2022, has returned to that role. Calle will oversee strategy, mergers and acquisitions and revenue operations.

Calle was “heavily involved” in loanDepot’s 2021 IPO, “as well as the game-changing acquisitions of imortgage and Mortgage Master that cemented loanDepot’s diversified origination strategy,” the company said in an Oct. 13 press release. “He helped launch a consumer lending program and led the company’s expansion into settlement services through multiple acquisitions.”

On Tuesday, Hsieh announced loanDepot is reassembling the company’s “Consumer Direct Lending Dream Team,” with regional sales leader Bill Goforth promoted to senior vice president of consumer direct lending sales.

Goforth “will lead the company’s national sales force and focus on building a best-in-class sales organization,” reporting to founding employee Alex Madonna in a new role, executive vice president of consumer direct lending, the company said.

“With today’s news, as well as the recent announcements of the return of Rick Calle as chief strategy officer, Dominick Marchetti as chief digital officer and Sean DeJulia as chief innovation officer, we are going back to our roots to re-assemble the team responsible for our first decade of growth and success,” Hsieh said in a statement. “Consumer Direct Lending is our core expertise, and each of these leaders will contribute their vast knowledge, experience and winning mindset as we return to competing at the highest levels.”

Hsieh signaled he’d be cleaning house

LoanDepot declined to comment on whether the overhaul of the company’s executive ranks was connected to the lawsuit.

But in announcing Hsieh’s return as permanent CEO in July, the company signaled changes were in the works.

“As part of his charter for the next 90 days, Hsieh plans to add several top-tier executives to his leadership team, expanding a best-in-class constellation of mortgage leadership talent,” the company said in a July 28 press release. “The team will be aligned to Hsieh’s innovation agenda and will be laser focused on improving Company performance in the near term while setting the stage for long-term growth and a return to industry leadership.”

LoanDepot hasn’t turned a full-year profit since 2021, when it was one of the lenders reaping the benefits of a refinancing boom driven by record-low mortgage rates during the pandemic.

LoanDepot trimming losses

Source: loanDepot earnings reports.

Hsieh handed over the CEO reins to former CoreLogic CEO Frank Martell in April 2022, as mortgage rates were soaring. Although the company racked up a $610 million loss that year, Martell oversaw drastic downsizing designed to put the company back on the path to profitability.

After being ousted as loanDepot’s executive chairman in 2023, Hsieh won a proxy fight and succeeded in placing an ally, real estate veteran Steve Ozonian, on the company’s board.

With the company still in the red after shedding more than 7,000 employees, loanDepot announced in March that Martell would step down in June with Hsieh returning as interim CEO.

Among the ranks of top loanDepot executives, holdovers from the Martell era include Chief Financial Officer David Hayes, a 14-year veteran of CoreLogic who joined loanDepot a year after Martell became CEO in 2022; Chief Human Resource Officer Melanie Graper, who also spent 14 years at CoreLogic; Chief Risk Officer Joseph Grassi; and Chief Legal Officer Gregory Smallwood.

Martell, who formally stepped down as loanDepot CEO in June, is now president and CEO of SmartRent Inc., a publicly traded provider of automation solutions for the rental housing industry.

Top loanDepot executives who joined the company before Martell’s tenure include Viviana Pitre, managing director of mortgage lending operations; Jeff DerGurahian, chief investment officer and head economist; T.J. Freeborn, chief marketing and customer experience officer; Darren Graeler, chief accounting officer; and Marissa Moore, a founding employee who rose through the ranks to her current role, executive vice president of product and strategy.

In addition to Martell, executives who have departed the company this year include Jeff Walsh (president, LDI Mortgage), Dan Binowitz (managing director of servicing) and George Brady (chief information officer).

LoanDepot announced Walsh’s retirement in August, effective Sept. 5.

“Over the past twelve years, Jeff has played a major role in the growth of the company, most recently leading our production channels,” Hsieh said in a statement. “On behalf of the company, I want to thank Jeff for everything he’s done to propel our company forward.”

In submitting his resignation in August, Walsh agreed to make “reasonable efforts” to cooperate with the company in the defense of any legal claims, inquiries or investigations relating to his areas of responsibility or knowledge. Walsh’s separation agreement also provides six years of directors and officers (“D&O”) liability insurance coverage with respect to services he provided to loanDepot.

Binowitz left loanDepot in July and joined a competitor, Rate, as a managing director in September. Brady departed loanDepot in April and currently serves as an advisory board member at HTEC Group Inc., a Palo Alto, California-based IT services and consulting firm.

Shares in loanDepot, which hit a 52-week high of $5.05 on Sept. 17 following a bullish call by stock analyst and renowned short-seller Andrew Left’s Citron Research newsletter, closed at $2.98 Tuesday.

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