Maryland judge rejects loanDepot effort to toss LO comp lawsuit

A federal judge in Maryland has denied loanDepot’s bid to dismiss a proposed class-action lawsuit that accuses the lender of violating federal loan officer compensation rules and steering borrowers into higher-rate mortgages.

U.S. District Court Judge Julie R. Rubin on Friday rejected loanDepot’s motion to dismiss for failure to state a claim and for lack of jurisdiction, ordering the company to answer an amended complaint filed by borrowers.

The case centers on alleged violations of the Truth in Lending Act (TILA)’s loan originator compensation rule, which prohibits paying loan officers based on a loan’s terms or interest rate.

In a memorandum opinion, Rubin found that the plaintiffs adequately alleged a concrete financial injury by claiming they paid higher interest rates and fees tied to the lender’s alleged steering and compensation practices.

“Although there appears to be a dearth of caselaw addressing higher interest rates as an injury stemming from steering due to violations of the LO Comp. Rule, federal courts routinely find allegations of higher interest rates based on lenders’ misconduct sufficient to allege an injury in fact at the pleading stage,” Rubin wrote.

She added that, at the pleading stage, traceability requires only allegations sufficient to state that there is a causal connection between the injury and the conduct complained of that is not “highly attenuated.”

Representatives for the plaintiffs and loanDepot did not immediately respond to HousingWire’s requests for comment.

The lawsuit was initially filed in July 2025 and amended in October 2025 by plaintiffs Nathan Johnson, Rachel DeBaun, Nathan Moore and Shawn Derrick. The amended complaint alleges a single count of TILA violation tied to an alleged rate-based compensation system that rewarded loan officers for placing borrowers into more expensive loans.

The borrowers claim loanDepot steered them into mortgages with higher interest rates and/or fees through this compensation structure. Each plaintiff obtained a loan from loanDepot between September 2019 and June 2021 for properties located in Maryland or Virginia. In June, borrowers had to change their representation amid questions of conflict of interest tied to the previous attorney.

TILA generally has a three-year statute of limitations for these types of claims. LoanDepot argued the claims were time-barred, but Rubin found dismissal on timeliness grounds “premature” because the plaintiffs plausibly alleged that loanDepot concealed the alleged scheme and that they did not learn of it until December 2024 or later.

The court noted that the plaintiffs’ allegations “are not terribly detailed” but concluded they are enough to move past the pleading stage and into discovery.

This article was written by Flávia Furlan Nunes and generated with the assistance of HousingWire Automation, then reviewed by a HousingWire editor before publication.