Borrowers sue LGI Homes and loanDepot, alleging deceptive sales scheme

Florida homebuyers have filed a class-action lawsuit accusing LGI Homes, loanDepot and their joint venture, LGI Mortgage Solutions LLC, of running an “improper home-sales scheme.”

The complaint, filed in federal court on July 29, alleges the companies rely on misleading monthly payment advertisements and high-pressure tactics to steer renters into mortgages they cannot afford. The lawsuit follows investigative reporting by Hunterbrook Media, along with public filings and statements by LGI, according to the complaint.

LGI did not immediately respond to HousingWire‘s request for comment. loanDepot said it had no comment.

According to the lawsuit, LGI, a national homebuilder operating since 2003, markets itself as enabling renters to become homeowners with payments “as low as $799” per month and no down payment. But plaintiffs say these offers omit key costs, such as property taxes and homeowners association (HOA) dues, that can add 30% to 70% to the payment, depending on down payment and financing terms.

The plaintiffs claim that LGI and loanDepot, a national mortgage lender, target renters “who are largely lower-income and minority Americans” by promising they can buy with the same monthly cost as rent but then pressure them to close quickly and without outside advisers. Many borrowers allegedly used Federal Housing Administration (FHA) loans.

Alleged sales tactics

The lawsuit states that once prospective buyers engage with LGI, the builder allegedly “funnels its customers to loanDepot,” including through LGI Mortgage Solutions, even when buyers have preexisting lender relationships or are eligible for Department of Veterans Affairs (VA) loans. This structure creates a captive customer pipeline, limiting outside advice and generating “massive” revenues, the suit claims.

The plaintiffs say LGI trains sales representatives to convert about 20% of shoppers on their first visit, and uses tactics designed to speed decisions and restrict outside input. For example, sales reps allegedly tell customers that homes are moving quickly, refuse to answer some questions, and say buyers cannot use their own real estate agents or brokers.

The filing cites individual borrower stories. One allegedly put down a nonrefundable deposit before learning she would owe additional fees and taxes. She now pays roughly $2,450 a month, nearly 30% more than the price advertised, and her payment is rising, according to the complaint. Plaintiffs say these increased costs were never disclosed beforehand.

Another buyer believed he would pay $300,000 for his LGI home with no down payment but learned at closing he had to put $3,000 down, the suit alleges. LGI also directed him to use loanDepot for his mortgage despite his VA loan eligibility, according to the complaint.

An analysis cited in the complaint claims LGI routinely charges higher prices than other builders, with an average 28% markup compared with new homes in the same neighborhoods built by competitors.

Combined with under-disclosed monthly costs and alleged construction issues, plaintiffs say this pricing structure has left many buyers underwater on their mortgages, with foreclosure rates higher than those associated with other builders.

Low resale values offer little relief, the complaint alleges, leaving borrowers “trapped in homes they were pressured into buying before having the rug pulled out from under them,” while the companies repeat the model in new developments.

The plaintiffs assert several causes of action, including violations of the Truth in Lending Act (TILA), the Florida Deceptive and Unfair Trade Practices Act (FDUTPA), negligent misrepresentation and fraud.

The complaint seeks a jury trial and asserts federal jurisdiction under the Class Action Fairness Act, alleging an amount in controversy exceeding $5 million, at least 100 class members and minimal diversity between the parties.