Guarantee Rate Sues American Funding And Poaches Employees

Top-10 mortgage lender Guaranteed Rate has initiated a lawsuit against its retail competitor, New American Funding, over allegations of poaching employees. This case stands out as it accuses New American Funding of engaging in illegal loan officer compensation practices to lure at least 30 employees away since early 2023.

The lawsuit alleges that New American Funding has violated the loan officer (LO) compensation rule by manipulating lead sources, allowing them to offer reduced rates and secure more loans. This practice, according to industry experts, is widespread among retail lenders but lacks enforcement New American Funding, through Tara Castrejon, its director of content marketing and public relations, has declined to comment on the ongoing litigation. Guaranteed Rate has yet to issue a response to inquiries regarding the lawsuit.

Filed on December 26 in the Circuit Court of Cook County, Illinois, the lawsuit seeks injunctive relief and damages. Guaranteed Rate accuses New American Funding of tortious interference, violation of Illinois deceptive trade practice laws, and misappropriation of confidential information. The lawsuit highlights the targeted poaching of employees across several states, including Washington, Arizona, Texas, Georgia, Missouri, Florida, and Illinois.

The lawsuit marks the recruitment of Gregory Griffin, a former regional manager at Guaranteed Rate, by New American Funding as the beginning of the alleged aggressive poaching campaign. Griffin, who joined New American Funding with a non-solicitation agreement from his previous employer, is accused of facilitating the recruitment spree.

Guaranteed Rate claims that former employees who moved to New American Funding improperly shared sensitive borrower information, such as pay stubs and bank statements. This action allegedly led to a significant number of customers transferring their business from Guaranteed Rate to New American Funding.

One of the lawsuit’s significant accusations is that New American Funding has repeatedly violated Regulation Z by allowing loan officers to adjust their compensation through lead source manipulation. This practice purportedly offers a pricing advantage to New American Funding at the expense of loan officers’ earnings and violates legal compensation structures.

Guaranteed Rate contends that these practices have resulted in substantial revenue losses, diminished investment, and lost future business opportunities. Furthermore, the lawsuit accuses New American Funding of falsely representing to potential recruits that its compensation arrangements were approved by the Consumer Financial Protection Bureau (CFPB), adding to the controversy surrounding these allegations.