5 mortgage industry legal battles to watch in 2024

Legal battles underway in the mortgage industry today cover the fallout from cyberattacks, contract breaches and employment lawsuits.

Mortgage servicers have increasingly been targets for cyberattacks, leaving clients’ personal information compromised and leading to a number of class action lawsuits regarding how these companies handle data breaches.

Academy Mortgage, for example, is accused of a lack of urgency in informing customers of an incident that took place in 2023, which made them vulnerable to identity theft. A class action suit alleges Academy lost control of its computer network and of highly sensitive personal information on March 21, 2023, but failed to report it to customers until Dec. 20, 2023, “an appalling nine months after the data breach occurred.” 

Related: Loandepot faces class action over PII exposure during breach

In the Academy breach, more than 280,000 customers had their birth dates and Social Security numbers compromised. The plaintiff blames Academy for, among other things, not maintaining reasonable security safeguards to protect customer data, making the mortgage lender an “easy target for cybercriminals.” 

In Texas, a district judge approved a request to combine twenty class action suits against lender Mr. Cooper into a single case under one plaintiff, Jennifer Cabezas, who was the first to bring a motion against the company after it was hit by the data breach in October. In total, that cyberattack exposed the PII of Mr. Cooper’s 14.7 million customers. 

Related: Mr. Cooper reports lower earnings due to MSR mark, breach 

Mr. Cooper is accused of failing to implement the security safeguards necessary to protect customer information, as well as not being timely and transparent in communicating with customers. The exposure of data “disturbs customers, as they no longer control their highly sensitive and confidential personal information, cannot stop others from viewing it, cannot prevent criminals from misusing it, and crucially cannot control where and to whom that personal information is sold and subsequently used,” Cabezas’ suit said.

Outside of cybersecurity, United Wholesale Mortgage (UWM) is suing Atlantic Trust Mortgage Corporation for breaching its controversial All-In agreement. This is the second legal action of its kind since December, pointing to a potential ratcheting up of UWM’s ultimatum enforcement.

The suit accuses Atlantic Trust of sending 71 loans to Rocket Mortgage or Fairway Independent Mortgage since December 2022, “intentionally and directly undermining the entire purpose of the All-In Intuitive.” UWM claims the breach of contract has damaged it in various ways “including but not limited to, allowing Atlantic Trust to reap the benefits of UWM’s investments in and services provided to it as a broker partner, including UWM’s proprietary technology.”

Related: Broker’s UWM “All-In” complaint should be tossed, judge says

UWM is also involved in other litigation regarding an employment contract the company made employees sign in recent years, which violates numerous labor laws, a judge with the National Labor Relations Board found. 

Administrative Law Judge Susannah Merritt ordered UWM to rescind unlawful portions of the contract and distribute a revised version to current and former workers. Merritt agreed with federal prosecutors that large portions of the contract were “overly broad, ambiguous and/or discriminatory.” The judge also found language around arbitration, social media use and media contact in violation of labor laws.

Catch up on these and other legal battles to watch this year, and check back with National Mortgage News for ongoing coverage.