CCM Goes After Ex-LOs. Plus, Are You Training Your AI Replacement?

When an LO leaves a mortgage lender, who actually owns the customer relationship? 

I ask b/c CrossCountry Mortgage is demanding thousands of dollars from former LOs who left the Cleveland-based lender & then refinanced their old CCM customers. Don’t pay up, & CCM says it could sue.

In today’s edition of The Mortgage Scoop, we’ll break that down. Plus, what happens when mortgage execs are told how to get employees to train their own replacements? Karen Postiglioni explores.

(BTW, we’ll have a special edition Tuesday detailing how lenders are using AI to transform their lead gen strategies, so be on the lookout for that.)

You may have left CrossCountry Mortgage, but apparently your customers didn't leave w/ you. At least that's the message CCM is sending to some former LOs. And CCM is attaching quite the price tag.

In cease-and-desist letters dated Oct. 29 & obtained by The Mortgage Scoop on Friday, CCM alleges that former LOs violated two-year non-solicitation agreements by originating loans for previous CCM customers. Per sources, dozens of former CCM LOs have received letters demanding several thousand dollars to nearly $20K. It’s unclear exactly how many were sent, but one lender alone said that at least 25 were addressed to their roster of LOs.

Interestingly, CCM's agreements would appear to presume that any loan originated for a former CCM customer violates the non-solicit. CCM apparently doesn't necessarily have to demonstrate that the LO actually solicited the borrower.

Check out this cease-and-desist sent to an LO in Michigan:

As you can see, CCM—which is hosting its sales rally 🥳 in Orlando this week—wants 75 bps on each allegedly offending loan(!), payable within 10 business days.

A CCM spokesperson didn’t immediately get back to me.

So here’s a Q for legal eagles beagles 🐶: Can one violate a non-solicitation agreement w/o soliciting anyone? It’s possible that clients reached out to the LOs, right?

An attorney at a rival lender told me these letters could even invite a class action in states like California, New York & Washington, potentially putting CCM's restrictive covenants on trial.

The letters also invoke non-solicits covering referral partners, including Realtors & other sources of business. That's a pretty enormous universe ♾ of relationships.

Look, lenders routinely pursue former LOs over unpaid signing bonuses, poached colleagues or stolen borrower data. But going after someone for refinancing an old customer well outside the EPO window, even when the borrower may have initiated the transaction? I personally haven't seen a major lender take this approach so broadly.

So why now? Well, CCM closed its ~$1.28B acquisition of the MSR-focused REIT Two Harbors a few months ago, adding roughly $155B in servicing to an existing $209B portfolio. Leonhardt specifically touted the deal's "greater opportunities for retention & recapture." And nothing sullies a recapture strategy quite like a former LO refi’ing your customer first.

"I don't know that he'll actually sue, especially not now after this bad press," a rival exec told me. "But what I think he's really trying to do is deter people, at least make them think twice about doing refinances."

The economics make sense. A letter from in-house counsel costs next to nothing. If enough former LOs think twice before refinancing old customers, or current producers reconsider leaving, the protected servicing value could dwarf the bad press. Speaking of…

When CCM wants a producer, they’re typically willing to pay up w/ big signing bonuses. Branch managers love that Leonhardt will personally help get recruiting deals done, & the autonomy at CCM is considered a strength by many. But the various perks don’t come for free. Few lenders are as aggressive about going after ex-LOs for allegedly violating their employment agreements, & those agreements are often more restrictive than LOs will find at other shops.

With CCM signing LOs to four- & five-year deals, plus a two-year tail, you’re potentially committing the better part of a decade of your book. So… is that signing bonus really a bonus, or is CCM buying your book?

There’s risk for CCM if recruits take a more skeptical eye toward the agreements & reject some covenants.

“LOs will sign shit like this w/o a second thought & think it will never matter,” said one industry player. “But if they’re making a move & considering multiple places, every other lender is going to constantly remind [LOs] of this.”

That said, money talks, & in this market plenty of LOs will happily cash a fat check & swallow everything else that comes w/ it. Per RETR, CCM has gained 1,667 LOs over the last year & lost 843. It really is a remarkable recruiting machine.

Since I launched this newsletter over a year ago, the single most common request I’ve gotten (besides “who’s your source?”) is: can you plz start a podcast?

I am aware that the mortgage industry isn't exactly suffering from a shortage of podcasts. Some are great. Some are… pretty 💩 if I’m honest. So we took our time building The Mortgage Scoop Podcast. We wanted to produce something that's super-fun to listen to, packed w/ insights & is quite different from the trillions of other mortgage podcasts fighting for your attention.

So here’s what we’ve been cooking: a 30-minute weekly breakdown of the most interesting things being whispered about in mortgage. Unfiltered commentary, w/ scoops & insights you can’t get anywhere else. And we’re respectful of your time!

I’ll be co-hosting w/ Jeremy Dean, a mortgage broker & title company owner who’s been on the front lines for decades. I bring the reporting & Jeremy brings the operator’s take on what it actually means for your business.

We’re launching in a week or two & I want to hear from you - what would you like us to cover? We’ll be on Apple Music, Spotify, YouTube & wherever else you get your podcasts (Yoto Player for all the toddler parents out there???). 

Interested in sponsoring? Plz reach me at [email protected].

By Karen Postiglioni

In Wednesday’s edition of The Mortgage Scoop, James Kleimann shared a couple comments I made about the IMN Mortgage AI Forum. I want to expand on those & add something I hadn’t mentioned.

There were great discussions, smart people & fresh perspectives. But there were also a few things said on stage that didn’t sit right w/ me.

One piece of advice came up repeatedly. I’m paraphrasing, but not by much: Tell employees they’re training their AI assistant. You’ll get better cooperation if they think they’re training their assistant instead of their replacement.

Whether that was meant as managerial advice or a way to mislead, I’ll let you decide. Personally, I found it gross.

We’re asking people who’ve spent years—maybe decades—developing expertise to help train technology that could ultimately eliminate their jobs. And the advice is how to get them to cooperate w/o feeling threatened?

Meanwhile, my LinkedIn feed is full of people struggling through layoffs, pay cuts & an incredibly difficult job market. It’s heartbreaking.

After years of brutal market conditions & policy decisions largely outside our control, AI is entering the picture, too. According to a September survey from MBA, AARMR & Boston Consulting Group of 31 lenders & servicers representing roughly 40% of the market, AI adoption is growing, but measurable business outcomes remain limited. Some employee productivity gains are emerging, but significant improvements in cost reduction, customer experience & risk reduction aren't widespread. In fact, 45% cited unclear ROI as a barrier to scaling AI.

So we’re having all these conversations about replacing people, but where are the dollars? Where are the measurable improvements in mortgage economics?

I absolutely believe AI can deliver them. But shouldn’t we measure whether we’re improving the business, not just whether we can automate someone’s job?

I also mentioned to James how many generic tech vendors are entering mortgage. Silicon Valley has definitely arrived. Two vendors I spoke w/ at the conference told me they had no one on their teams w/ mortgage experience.

There are excellent companies doing genuinely interesting work, including people who understand this business. And we absolutely need outside perspectives. But mortgage lending isn’t just a collection of workflows waiting to be automated. It requires institutional knowledge, regulatory expertise & judgment.

It’s hard watching people w/ little understanding of this complexity talk about transforming the industry while experienced mortgage professionals struggle to find work. Why wouldn’t we want those people helping shape its future?

People sometimes describe mortgage as “clubby,” like that’s a bad thing. But I think part of that is because we genuinely care about our own. There’s pride in what we do.

I’ve spent much of my career improving operations, implementing technology & making businesses more efficient. I understand the economics & the difficult decisions involved. I’m certainly not advocating keeping broken processes to protect jobs, particularly when profitability is already scarce. But we have a responsibility to consider the people affected by these changes, especially when we’re asking them to teach technology how to do their jobs.

How we go about changing matters.

We can’t control everything affecting this industry, nor should we stop technological progress. But we can control how we treat people. We can involve experienced mortgage professionals in building what comes next, be transparent about AI’s implications for their jobs & invest in helping them transition into new roles.

We should also hold ourselves & our vendors accountable for delivering actual economic results, not just impressive demos & promises.

We have an opportunity to build something better. And I don’t want to see an industry I’ve spent my career in lose the people & knowledge that made it what it is.

(🙏 If you like what you’re reading, tell a fellow mortgage junkie to sign up here.)