One of the nation’s top mortgage lenders, CrossCountry Mortgage, has sent cease-and-desist letters to at least 25 former loan officers, based on local reports and interviews with one of their new employers.
In these letters, CrossCountry Mortgage invokes a two-year, non-solicitation window and demands thousands of dollars in combined penalties under the employment agreements signed by the loan officers.
A “legal presumption” of violation
The company cites a contractual provision creating a “legal presumption” that any mortgage product or service provided to a past, present, or future CrossCountry Mortgage customer violates the agreement.
Under this framework, the company declares that “each loan is presumed to violate your non-solicitation covenant.”
Dated Oct. 29, the letters were sent by Ashley C. Wakefield, senior corporate counsel for the Cleveland-based lender.
Each document contains a three-part demand: a cease-and-desist order, a payment demand based on 75 bps for each refinanced loan, and a litigation preservation notice. The loan officers have 10 business days to respond.
According to the letters, the repayment amounts range from several thousand dollars to nearly $20,000 in one case.
Restrictive covenants and confidential material
The company argues that these agreements include provisions related to confidentiality, nonsolicitation, and return of property that remain in effect after an employee leaves.
They assert that confidential material covered by the agreements includes all non-public personal information of borrowers protected under the Gramm-Leach-Bliley Act.
The letters state that every loan handled by the LOs during their time there “remains CCM’s sole and exclusive property.”
Potential impact on hundreds of loan officers
Data from RETR shows that 843 loan officers have left the company in the past 14 months. Of these, 61 produced at least $20 million in volume during that period, though it’s unclear how much of this volume involved former CrossCountry Mortgage clients. Many others are now inactive or have not originated any loans.
