loanDepot lawsuit directs a spotlight on LO comp practices

The suit accuses loanDepot of pressuring LOs to offer borrowers higher-rate loans in exchange for higher compensation, forming the basis of the steering claims. If LOs were unable to close these deals, they allegedly transferred the borrower to internal loan consultants (ILCs), enabling lower compensation to be paid instead.

But in practice, the transfers were largely fictitious, with the original LO continuing to work on the file, the lawsuit claims. If the reason for the transfer — such as securing a lower rate — was truthfully documented, the LO received no commission. But if the reason was falsified using one of several preapproved justifications beyond their control, they were paid at a reduced rate.

“From the LO comp rule, nothing prohibits a creditor from…