Mortgage lender Guaranteed Rate Affinity is suing a divisional manager for allegedly orchestrating a “mass departure” to competitor Cardinal Financial Company, a violation of the employment agreement.
According to the company, on the evening of June 17, Jonathan Engler resigned from his position as senior vice president and divisional manager for the California divisions, which includes the states of California, Nevada, Washington, Oregon, Idaho, Alaska and Hawaii.
After his resignation at approximately 5:00 p.m., his direct reports also began to resign until around 8:00 p.m., including six regional managers, an executive assistant and a business development associate, the mortgage lender alleges.
The former employees started working for Cardinal Financial Company a few days after leaving Guaranteed Rate Affinity – Engler landed a senior vice president and retail divisional leader job at the new company, similar to his position at the previous lender, according to the lawsuit.
The lawsuit, filed Wednesday in the United States District Court, District of Nevada, includes two counts: breach of contract and breach of fiduciary duty/duty of loyalty.
John Thomas, senior vice president for integrated communications strategy at Guaranteed Rate, said the company does not “comment on pending litigations.” Guaranteed Rate owns 50.1% of Guaranteed Rate Affinity and Realogy owns 49.9%.
HousingWire recently spoke with American Pacific Mortgage President Ned Payant about how to build a culture that attracts and retains mortgage talent.
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Engler did not respond to requests for comment.
Guaranteed Rate Affinity’s employment agreement says employees “will not use any confidential information for your own benefit, or divulge to or use the confidential information for the benefit of any competitor,” including the identity of the company’s top-performing employees. Employees who fail to comply must pay $50,000 to the company as damages, the agreement says.
The mortgage company said the resignations were simultaneous and all resignation notices had similarities, suggesting Engler and Cardinal coordinated the departure wave.
“Upon information and belief, Defendant and Cardinal coordinated the recruitment and hiring of the former GRA employees and then directed and coordinated their nearly simultaneous resignations, which was not coincidental,” according to the lawsuit.
Guaranteed Rate Affinity is a joint venture between Guaranteed Rate, the eighth-largest U.S. mortgage lender, and Anywhere Real Estate, formerly known as Realogy Holdings Corp. The company said it funded more than $15.9 billion in total loan volume in 2021, an increase from $13.4 billion in 2020 – Engler told MPA Mag he expected his team to close $2.9 billion in loans in 2020.
Charlotte-based Cardinal Financial Company is #35 on Inside Mortgage Finance‘ ranking of top U.S. mortgage lenders for the first half of 2022. The company originated $7.8 billion from January to June, a 53% drop compared to the first half of 2021, per IMF.
Guaranteed Rate Affinity’s case shows that recruiting wars remain fierce, even in a mortgage market downturn.
In July, the nonbank lender loanDepot sued rival CrossCountry for allegedly poaching dozens of high-performing loan officers from its New York branches.
Guild Mortgage and Caliber Home Loans have both sued CrossCountry on similar grounds. Caliber, part of New Rez, said CrossCountry had snagged 80 top-producing LOs who originated $2.3 billion in business. In October 2021, Guild Mortgage sued CrossCountry for allegedly engaging in similar practices.
loanDepot also sued seven former loan officers from the Meredith-Rogers team in September for joining CrossCountry and allegedly transferring loans in the pipeline to their new employer.
Though non-compete agreements do exist in the mortgage industry, it’s far more common for lenders to sign non-solicitation agreements that target branch manager level employees and above, Scott Crutcher, a mortgage industry recruiter, told HousingWire last year.