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Banc Of California Sues Sprout Mortgage, Planet Home Lending,

David Krechevsky
Dec 01, 2022
Court Justice

Claims Non-QM lender, servicer owe the bank more than $3.5 million

The Banc of California has filed a lawsuit against Planet Home Lending and the now-closed Sprout Mortgage and its affiliates, claiming the mortgage lenders and servicers owe the bank more than $3.5 million.

The total owed includes $1.5 million in proceeds from the liquidation of two loans owned by Banc of California and serviced by Sprout and Planet Home, as well as over $2 million owed by Sprout via a warehouse line of credit it held with the bank.

According to the complaint, filed Nov. 2 in U.S. District Court for the Central District of California, Southern Division, Banc of California claims it owned two notes — one designating Craig Ataide as the primary borrower, the other designating Raymond Topps as the primary borrower — that it purchased from Sprout and its affiliates in 2020. Sprout retained the servicing responsibilities for the notes, with Planet Home serving as sub-servicer.

The complaint states that the “Ataide Note was liquidated via refinance and the Topps Note was foreclosed upon,” with Planet Home receiving the proceeds in early August 2022. “Because Banc owned and funded the two notes, the proceeds from the liquidation of the notes rightfully belong to Banc,” the complaint states.

Neither Planet Home nor Sprout, a Non-QM lender that abruptly shut down on July 6, have remitted the proceeds to Banc of California, “despite multiple requests,” the complaint adds.

Planet Home Lending is part of Planet Financial Group LLC (PFG), which is based in Meriden, Conn. PFG It is a fully integrated family of companies delivering origination, servicing, and asset management services nationwide.

The lawsuit names as defendants Planet Home Lending, Sprout Mortgage Corp., Sprout Mortgage LLC, Sprout Mortgage Asset Trust, and Recovco Mortgage Management (also a Sprout subsidiary), as well as Sprout founder Michael J. Strauss.

In its complaint, Banc of California includes information about a subservicing agreement that Planet entered into with Sprout in Sept. 2019, and adds that it covers the Ataide and Topps notes.

Banc of California claims it is owed over $1.1 million in proceeds from the Ataide note and about $405,000 from the Topps note.

In an emailed statement, a spokesperson for Planet Home said the company does not believe it should be named as a defendant in the lawsuit.

"Planet does not have a contractual relationship with Banc of California and is disappointed to be named in this dispute between Banc of California and Sprout Mortgage," Dona Dezube, vice president communications for Planet Home, said in the email. "Plant is confident that it has fulfilled its obligations as a sub-servicer for Sprout and expects a favorable resolution of this matter."

In addition to the unremitted funds, Banc of California said in its complaint that “Sprout currently owes a balance to Banc on the warehouse line in the amount of $2,043,490.52.”

The complaint claims the defendants are in breach of contract and breach of fiduciary duty, as well as in violation of the California Business and Professions Code. The bank is seeking both restitution of the money owed as well as compensatory damages

Since it abruptly closed on July 6, laying off more than 300 people, Sprout has filed for bankruptcy and has been the target of numerous lawsuits, both by creditors and former employees.

Officials with Sprout Mortgage could not be reached.

Published
Dec 01, 2022
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