A newly filed class action lawsuit alleges that loanDepot engaged in a years-long scheme to violate federal loan officer compensation rules, steering borrowers into more expensive mortgage loans while concealing its conduct through falsified records and internal deception.
The alleged conduct, according to the lawsuit, occurred particularly before and after loanDepot’s initial public offering on Feb. 11, 2021, but has continued to the present.
Filed July 15 in the U.S. District Court for the District of Maryland (case No. 1:25-cv-02294), the suit claims loanDepot systematically tied loan officer compensation to interest rates and fees charged to borrowers, violating the Truth in Lending Act (TILA) and federal regulations under Dodd-Frank.
According to the complaint, when loan officers failed to close loans at higher rates, the company would reduce or withhold their commissions unless they falsely documented the file.
Borrowers who resisted high-rate offers allegedly were placed into loans under the name of an “Internal Loan Consultant” (ILC), despite the original loan officer continuing to handle the transaction. These “sham transfers,” as the lawsuit calls them, served to lower the loan officer’s pay while masking the connection to the loan’s pricing.
“There was no actual transfer of the loans to ILCs — the ILC assumed no additional duties — and the original loan officer continued to perform the same duties, but at a reduced commission rate,” the lawsuit alleges. “The only purpose of the sham transfer was to provide a false narrative that the loan officer’s compensation was being reduced because of the purported transfer, as opposed to a correlation to the reduction in price, which loanDepot knew was unlawful.”
The complaint paints a picture of a sophisticated concealment strategy designed to evade scrutiny by regulators and competitors while boosting profits in the run-up to loanDepot’s IPO.
The plaintiffs — five borrowers from Maryland, Virginia, and Florida — claim they were steered toward costlier mortgage products and never informed of lower-priced options available through loanDepot. None of their loans were “transferred” to an ILC, which, according to their complaint, indicates they may have paid more than necessary due to the alleged incentive scheme.
The suit also alleges:
- loanDepot created internal forms requiring LOs to falsely justify transfers to ILCs, typically blaming borrower requests;
- Loan officers who refused to falsify these forms received no commission;
- The company used automated systems to electronically robosign ILC signatures on federal disclosures, creating a misleading paper trail; and
- Managers allegedly encouraged employees to use the system to maintain volume — even at the expense of their compensation.
The plaintiffs seek certification of a nationwide class of borrowers who received loans from loanDepot’s retail channel between January 2019 and the present, excluding those whose loans were formally transferred to an ILC. They are seeking actual and statutory damages, return of finance charges and fees, and attorneys’ costs under TILA.
The complaint also suggests potential violations of federal criminal statutes, including wire fraud, securities fraud, false statements, and conspiracy, “among others.”
loanDepot has not yet filed a response to the complaint and declined to comment.
