Plucky Orange County broker shop WestCapital Lending is the target of litigation that alleges it stole troves of confidential data from loanDepot & is fueling its incredible growth through illegal & unfair practices. The lawsuit highlights the growing animosity in CA between IMBs & upstart broker shops that are growing like gangbusters. Let’s get into it.

First, a little background about WestCap. Helmed by consumer direct all-stars Danny Iskander (ex-loanDepot) & Eric Hines, WestCap has grown immensely over the last 3 years. It now has roughly 1,000 producing LOs, many of whom used to ply their trade at loanDepot. WestCap is Rocket Pro’s largest broker partner & is on pace to do north of $9B‼️ in mortgages this year, per RETR data. Some think of WestCap as Rocket’s version of UWM-affiliated Swift Home Loans.

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WestCap tends to do far more lead generation than other brokerages & is far more sophisticated at it, sources said. LOs use credit cards to pay for leads from FreeRateUpdate, Lower My Bills (Rocket owned btw), etc. & expense it. WestCap’s pricing is hard to beat & their LOs are accustomed to the call center grind.

The loanDepot lawsuit alleges that WestCap employees stole confidential loanDepot data & used it to work leads that loanDepot should have been working & closing. But more interestingly, it’s the 1st time a big player has said the hypergrowth mortgage brokerages aren’t outperforming the retail vanguards b/c they’re better at mortgages. They’re winning b/c they’re leaning on “illegal” practices that none of the big players would ever dare to roll out for compliance reasons. 

loanDepot said West Cap gives LOs a “lucrative split” on loan revenue, typically 10% to 15%, which violates LO comp rules & creates “a perverse incentive for LOs not to provide the best terms to a consumer in order to increase their own compensation.”

One IMB owner told The Scoop that broker shops have used the 1099 structure to gain an unbeatable recruiting edge in CA. “I'm losing loan officers even to smaller companies,” he said. “There's a brokerage here in LA that is recruiting my loan officers as we speak, saying, ‘Go get your real estate license, come here & we're going to pay your corporation the revenue — your commission. Now your commission is tied to revenue.’ You've got the 1099, which is the mechanism to avoid taxes. But this split is the big thing—it creates a completely unfair playing field w/ comp plans.”

The owner of a very large West Coast IMB told The Scoop that an LO can pocket significantly more money in a 1099 structure (maybe as much as double) & broker shops are willing to take compliance risks he’s not. “It’s fascinating that it’s never been challenged by the IRS,” he said. 

“There’s all kinds of hair on the idea of hiring originators as 1099s,” not the least of which is that if they really are employees, then they've got the wage-hour issues to deal with, which could provoke class-action lawsuits, one industry attorney said.

He wouldn’t recommend paying LOs as 1099s & not just b/c of the wage-hour issues. “I think there's a problem in 8b of RESPA, which is an illegal split. So the whole theory of how you pay a mortgage broker is that you pay for services, not for a referral of the loan. There's no exception for paying a mortgage broker like there is for a Realtor.”

Brokers say they comply w/ all state & federal laws and get audited just like the big IMBs. If there really were something shady, wouldn’t they have been shut down/heavily fined already?

One top mortgage broker did agree that CA has an extremely advantageous structure for mortgage brokers. But the retail complaints to him are little more than “sour grapes,” & he noted that there are retail LOs who have very questionable financial relationships w/ agents (some MSAs, for example).

“They’re getting their asses kicked. If they don’t like it they should complain to the California legislature.”

Hey, everybody! The Mortgage Scoop launched about 6 weeks ago & I’ve been blown away by the support. Thank you 🙏 so much. I wanted to share an important update about the business. We’ll be moving to a paywall pretty soon.

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UWM released a few additional details regarding their partnership w/ Bilt Rewards & I think this one is really fascinating b/c it could signal a shift in how servicers could think about engagement, retention & risk in the coming decade. 

Basically, homeowners whose mortgages are serviced by UWM can earn loyalty points for on-time mortgage payments. Borrowers will also get “exclusive neighborhood benefits including special offers to more than 40K local merchants nationwide,” the companies said. They’ll be rolling out the service w/ Bilt in early ‘26.

From what I can gather, Bilt points are usually about 1.5 to 2.5 cents per point so you’ll need to make a lot of mortgage payments before you book that trip to Tahiti. 

And just to be clear, you cannot pay your UWM-serviced mortgage w/ a credit card, even the Bilt Rewards Mastercard (which many use to pay the rent). The Bilt Rewards program will connect to your checking account & enable borrowers to get points, a UWM spokesperson said.

It’s not especially surprising that UWM is not permitting borrowers to pay the mortgage w/ a credit card. Consumer debt is already pretty high & DTIs are eyebrow-raising. That could backfire.

There’s real long-term upside w/ the points-based system. The average borrower doesn’t think at all about their mortgage servicer, or if they do they absolutely despise them. So if UWM can figure out the right guardrails & actually offer up something of value, that could be very profitable long-term.

“The only time I have a borrower come to me w/ a servicer issue is when they ask if my lenders sell to Servicer X?” said one broker. “Having them say b/c I hope you do would be a massive shift.”

I’ve talked to a lot of mortgage marketers of late about the potential impact of AI. I’ve seen those insane & incredibly life-like Sora2 videos of Stephen Hawking getting choke slammed by The Undertaker and doing 720s in a halfpipe at the X games. They make me wonder what that sort of power might mean for marketing departments in the future. Will the marketing herds thin & companies instead think about having creative directors making Rocket-like cinematic masterpieces?

One East Coast IMB executive said he didn’t think it would happen 🤷 .

“I just don't think any of it actually matters, because it's still just a relationship business,” he said. “The more of that online marketing that people see, the trying-to-create-the-Rocket-commercial thing, people don’t trust that stuff & they’ll call their buddy who knows the guy who does the mortgage.”

Bisnow reports that 447 HUD employees are to be laid off on Dec. 9. As I predicted, the Office of Fair Housing & Equal Opportunity are being decimated. Fair Housing teams in Denver & San Fran are being eliminated full-stop. Yikes.

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