Gorilla Poop, Glitter Bombs & a Big Win for Guild

For nearly three years, mortgage's weirdest & grossest recruiting war looked like it was headed toward an anticlimactic ending, w/ Guild Mortgage taking a procedural loss against CrossCountry Mortgage. Not anymore!

A California appeals court has reversed a lower court ruling that largely tossed Guild's lawsuit against CCM, reviving key claims tied to CCM's alleged ‘21 "raid" of Guild's Kirkland, WA branch. The decision is a major win for Guild & could carry significant implications for lenders still duking it out for top-producing branches.

For Mortgage Scoop Insiders, I've got a full breakdown of the ruling & what it means for the industry. (The case involves allegations of glitter bombs 🪩, gorilla poop 🦍💩& corporate espionage.)

Also in today's edition: Inside Figure & Sixth Street's $717M acquisition of Kiavi, a new cybersecurity threat lenders should be paying attention to, the first VantageScore loans showing up in agency MBS, a pretty wild clawback, & more.

Figure is scooping up Kiavi, the nation's biggest & baddest fix-and-flip lender, in a $717M deal announced Wednesday. It’s the blockchain-native marketplace's biggest bet yet on first-lien mortgages & another sign that its ambitions extend waaaaay beyond HELOCs. Let’s break it down!

The transaction is structured in two parts. Figure will pay $538M to acquire Kiavi's AI-powered lending platform & operating business, while a JV between Figure & Sixth Street will purchase the loans sitting on Kiavi's balance sheet (Kiavi completed a $350M securitization in February, FWIW). Going forward, Sixth Street will originate the loans & funnel them into Figure's marketplace, allowing Figure to remain asset-light while expanding its reach into investment-property lending.

"We're acquiring the platform, Sixth Street is acquiring the loans," Figure CEO Michael Tannenbaum told The Mortgage Scoop. "Basically, it's a marketplace day one."

Kiavi, which originates short-term RTLs & long-term DSCR rental loans, is expected to add more than $7B in annual first-lien volume to the Figure Connect marketplace, plus over $100M monthly to Democratized Prime, Figure's on-chain warehouse marketplace. Tannenbaum said Kiavi pushes the platform to roughly $24B in origination volume a year, w/ first-lien product jumping to roughly 40% of the mix.

That's a pretty major shift for a company still viewed by much of the industry as a HELOC player.

"We want partners to think about us in the first-lien capacity," Tannenbaum said. "We're much more than a HELOC company. Our ambitions have always been much greater."

The broader goal is to be a true alternative to the traditional mortgage infrastructure dominated by Fannie Mae & Freddie Mac. The rails 🛤 , if you will. Tannenbaum said lenders are increasingly viewing Figure as a platform rather than a competitor, noting that other market participants have already expressed interest in joining.

"They see Fannie Mae works w/ everybody," he said. "That's ultimately the way Figure's going to work here."

Kiavi is one of 30 to 40 acquisition opportunities Figure has evaluated since its IPO nine months ago. Kiavi posted over $250M in revenue & more than $100M in EBITDA last year. Kiavi’s Arvind Mohan will join Figure as chief business officer when the deal closes. Kiavi's assets will also be the first use case for Adaptor, Figure's new agent-to-agent AI tool that standardizes originator data for the marketplace (think API agents).

Figure is steadily assembling the pieces of a modern mortgage ecosystem: origination, capital markets, AI infrastructure & blockchain-based funding rails. If that strategy works, the industry's competitive landscape five years from now could look quite different. We may be talking about Figure & perhaps a handful of other tech-native lenders/marketplaces (ICE? Pylon? Better?) as legitimate challengers to the GSE model, no?

Mortgage veterans will probably remember this saga in part b/c it’s so unhinged. The dispute stems from CCM's recruitment of Christopher Flowers & a large group of Guild's Kirkland team during the refi boom. Guild alleged that Flowers, senior LO Cory Flynn & ops manager Lisa Joliffe worked w/ CCM for months while still employed at Guild. According to Guild, the trio recruited colleagues, diverted customers & shifted active loan applications to CCM before resigning. Guild ultimately lost pretty much the entire branch. 

(In a separate lawsuit, Flowers also claimed that two of his former colleagues at Guild bullied him w/ glitter bombs & gorilla poop. Neither currently works at Guild, but let’s set that aside for now.)

Guild prevailed in arbitration against Flowers, Flynn & Joliffe, w/ an arbitrator awarding Guild more than $10.6M against Flowers alone, plus smaller awards against Flynn & Joliffe. The ruling found Flowers had breached obligations & caused substantial damages. But Guild's separate lawsuit against CCM repeatedly ran into trouble in court —> trial judges largely accepted CCM's argument that many of Guild's claims were preempted by California trade-secret law & dismissed them before the case could even reach discovery.

The May 27 appellate court ruling reversed the entire dismissal & sent the case back to trial court. Here’s why that matters for mortgage executives, recruiters & LOs.