loanDepot, has reached a $3.5 million settlement over a class action lawsuit filed by shareholders. The suit accused the company, its founder Anthony Hsieh, other top executives, and bank underwriters including Goldman Sachs and Morgan Stanley, of making misleading disclosures around the time of its 2021 initial public offering (IPO).
According to court documents, all claims against the defendants will be released in exchange for the cash payment.
However, loanDepot and other defendants deny any wrongdoing, fault, or liability in the matter. The preliminary approval of the settlement was filed on July 26, according to the 10-Q, and is pending approval.
The class action was filed on behalf of investors who purchased loanDepot's class A common stock during the IPO and between March 16 and Sept. 22, 2021. Shareholders alleged that the company improperly collected double daily interest from refinance borrowers, misrepresented compliance practices, and misleadingly omitted information about projects known as “Project Alpha” and “Project Beta.”
These projects were claimed to have violated loan origination and underwriting requirements to boost performance; an allegation loanDepot has not admitted to.
But there are other lawsuits the company faces.
Another suit, filed by the company's former chief operations officer Tammy Richards, alleges interest overcharging and improper documentation of loans at Hsieh's command. Richards is seeking over $75 million in damages.
The recent loanDepot 10-Q filing indicates that the company plans to file a motion for summary judgment or summary adjudication against Richards by Nov. 15, 2023.
During an earnings call this week, the company acknowledged $8 million in costs related to the "settlement of legacy litigation.” Despite this, the lender managed to narrow its net losses from the previous quarter.
Earlier this week, it reported a net loss of $49.8 million in the second quarter. Year over year, it's a significant improvement. For the second quarter of 2022, loanDepot posted a net loss of $223.8 million.
The nation’s third-largest mortgage lender by funded loan volume said the decrease in the loss quarter over quarter is primarily due to an increase in revenues and operating efficiency benefits. In the first quarter, its loss was $91.7 million.
loanDepot still faces two separate shareholder lawsuits in California and Delaware and three similar shareholder derivative complaints filed in Delaware in July. These actions are in their preliminary stages, signaling that legal challenges for the company may continue to unfold.
A spokesperson for loanDepot declined to comment on the settlement.
