Top 10 mortgage lender and servicer Newrez sued one of its former executives over multiple allegations, including breach of contract, disclosure of confidential information and unfair competition tied to soliciting several Newrez executives to join a competing lender.
OneTrust Home Loans, a direct competitor of Newrez’s retail mortgage business, conspired with James Hecht, former Newrez executive vice president for national retail lending, to orchestrate the termination of several Newrez executives and have them join OneTrust, according to the suit filed Feb. 21 in the U.S. District Court for the Eastern District of Pennsylvania.
Just before Hecht’s resignation, he terminated the employment of five Newrez senior executives and rehired them at OneTrust to solicit Newrez loan originators that OneTrust could not otherwise easily recruit, Newrez alleged.
Because Hecht had unlimited access to loan originator production and compensation packages, “it is inevitable that Hecht could at any moment utilize and disclose Newrez’s most sensitive trade secrets in connection with his employment at OneTrust as its CEO to gain an unfair competitive advantage,” the lawsuit alleges.
Hecht was named the CEO of OneTrust within days of his departure.
The lender is seeking immediate injunctive relief to prevent Hecht’s continued employment with OneTrust.
Newrez also wants immediate and injunctive relief and damages against OneTrust for breaches of contractual and common law obligations, and for acts of misappropriation of trade secrets and unfair competition.
CalCon Mutual Mortgage LLC, doing business as OneTrust Home Loans, originated $1.07 billion in volume across 2,747 units in 2023, according to data platform Modex.
The lender has 165 sponsored mortgage originators and is licensed in at least 45 states and Washington, D.C, the Nationwide Multistate Licensing System (NMLS) showed.
OneTrust dismissed the claims of Hecht taking confidential information or orchestrating the departure of Newrez employees.
“A close reading of the complaint filed by Newrez reveals that its allegations of misconduct by James are based upon unfounded speculation and innuendo. I encourage all who are interested to read the actual litigation pleadings, including our response, before jumping to any conclusions on what is really going on,” Josh Erskine, founder of OneTrust Home Loans, said in an e-mailed statement to HousingWire.
Newrez restructured its retail division and cut several senior managers, HousingWire reported earlier this month. Newrez now claims that these termination decisions were driven by Hecht, Erskine added.
In a meeting with senior executives, Hecht had shared the scrapped potential sale of Newrez’s retail mortgage business. As part of the restructuring efforts, “Hecht participated in the decision to reduce costs and headcount at the management level and participated in identifying seven senior executives for termination of employment,” Newrez claims.
“Newrez is going to have to accept responsibility for its own decisions regarding its retail business,” Erskine said.
OneTrust and Hecht will be responding to Newrez’s allegations, Erskine added. Hecht didn’t immediately respond to requests for comment from HousingWire.
Newrez declined to comment on active litigation but noted it will “vigorously pursue all legal remedies available to us.”
In the latest development, the court ordered the denial of the motion without prejudice to seeking relief complaint. The court required Newrez to confer with Hecht and OneTrust or its counsel regarding an acceptable standstill on Hecht’s employment acts with OneTrust.
