LoanDepot lawsuit alleges large-scale fraud – NMP


The nation’s second-largest mortgage lender, LoanDepot, found itself in deep water last week when accusations by the company’s former COO, Tammy Richards, surfaced on Wednesday, revealing that the founder and CEO Anthony Hsieh had encouraged his sales team to cut corners on taking out loans in order to raise money during the refinancing boom and prepare for the company’s IPO.

Richards filed a class action against Hsieh for ordering the sales team to “trust all borrowers” and close all loans without checking any documentation.

Richards says Hsieh’s conservative approach to approving loans wore off overnight, after the government injected billions of dollars through the passage of the CARES Act. In the lawsuit, she says, “He had now entered a state of approval frenzy, pushing for the underwriting guidelines to be relaxed to levels that were beginning to border on immorality.”

Between 2016 and 2019, she says, she discovered that LoanDepot and Closing USA LLC (CUSA), a subsidiary of LoanDepot, were charging loan refinancing borrowers double the daily interest or per diem, due to the failure of CUSA to repay the original loans on time. The new loan and the old loan would both be paid daily until the old loan was paid off. The lawsuit document states that “the closing disclosure documents inaccurately reflected a closing date of the date the loan documents were printed, and not the date the original loan was actually paid, forcing thus the borrower to pay double the daily allowance. ”

Hsieh was hovering near the ethical limits line to boost revenue, the lawsuit claims, but it wasn’t until August 26, 2020, when everything changed and he allegedly launched his large-scale for-profit fraud program.

During a production meeting where Richards was present, she claims that Hsieh started shouting, “I’m Mello Clear, and we need to close the loans immediately regardless of the documentation!” Hsieh informed the sales team that they weren’t making enough loans and that sales “shouldn’t take this!” Claims the lawsuit. The lawsuit adds that senior officials have not expressed concern over Hsieh’s tactics.

Richards said she was shocked at the suggestion, knowing full well that it would be illegal and violate many federal laws, including Dodd-Frank Title XIV – Mortgage Reform and Anti-Predation Loan Act (“Dodd-Frank “). According to Richards, Hsieh walked a tightrope across ethical and legal boundaries until he finally crossed the line on August 26. If Hsieh goes ahead with the plan, Richards said she believes it will be one of the most egregious large-scale frauds-for-profit schemes in the years leading up to the Great Recession.

Two months later, on October 28, 2020, Hsieh went into another rage against Richards, according to the lawsuit, stating that Hsieh started shouting, “Close all loans … close without a credit report … close without documentation … close all the loans ! “He continued,” We are setting records every month and have increased our numbers and capacities, but it is not enough! Trust our borrowers and take out loans without documents! I have already paid taxes on these loans and the loans are already showing as income! ”

In response, says Richards, she said she couldn’t and wouldn’t close loans without a credit report.

In November 2020, Hsieh demoted Richards in what she describes as a “blind attack” during an offsite management meeting. Subsequently, Richards says LoanDepot executives devised a strategy, dubbed “Project Alpha,” in which Hsieh personally identified more than 8,000 loans that were closed without proper documentation. He then identified more than 200 processors with “super authority” to close these loans without documentation, and in return, those processors would receive additional bonuses if those loans were closed by the end of November, according to the lawsuit.

Richards also accuses Hsieh of ordering the company’s chief executive, Brian Rugg, to refrain from auditing the more than 8,000 loans that she says were processed illegally; Rugg then reported it to Richards in November 2020.

Richards was ultimately forced to quit her job in March 2021 for refusing to break the rules, she claims.

However, Richards’ lawsuit does not end with the fraud allegations. It also includes a comprehensive list of sexual harassment allegations, identifying the perpetrators as the most senior executives in the company – a team made up entirely of men, with the exception of Richards.

The lawsuit claims that the high-level management, activated by Hsieh as CEO, fostered a “misogynistic brotherhood house culture” within the company headquarters, to the detriment of its female employees, and that the former female employees executives, such as former director of operations Tiffany Entsminger, abruptly resigned for harassment and gender discrimination.

Richards says one of the main provocateurs in promoting LoanDepot’s “house of fellowship” culture is Tomo Yebisu, a senior executive and close friend of Hsieh. After the Chairman’s Elite Awards, Yebisu hosted an after-party at Hsieh’s home, where the lawsuit claims he rewarded LoanDepot male sales award recipients with a night filled with alcohol, drugs and the prostitutes. The stories that followed the party were so salacious they led to volunteering Brian Owens, senior vice president, resigned because of the Yebisu-sanctioned activities, according to the lawsuit.

LoanDepot responded to the allegations by saying, “The claims in the lawsuit, which we take very seriously, have already been thoroughly investigated by independent third parties and have been found to be without merit. We intend to vigorously defend ourselves against these far-fetched allegations.

After its IPO in February 2021, LoanDepot sold 3.85 million shares at $ 14 and raised $ 54 million, allowing its revenues to rise from $ 1.3 billion to $ 4.3 billion in a year.

The planned initial public offering was a cover-up of Hsieh’s increasingly reckless tactics, says Richards. As the offer nears, LoanDepot paid a ‘one-time discretionary bonus’ to its executives, with Hsieh receiving $ 42.5 million and other senior executives receiving bonuses ranging from $ 9 million to $ 12 million. .

Richards claims she was excluded from that bonus round because she was demoted in November. Her lawsuit seeks compensation for unpaid premiums and forfeited shares which she says were worth $ 35 million.

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