Xactus, MeridianLink & a Very Spicy Lawsuit

At first blush, Xactus’s Wednesday morning press release reads like a pretty standard mortgage-tech acquisition announcement. The CRA heavyweight said it had acquired MCL from MeridianLink, giving it a fat book of business in the CU/community bank space. Financial terms were not disclosed, but MCL will operate as an independent subsidiary of Xactus under a new brand: the almost Scientology-sounding XedaLink. 

That XedaLink will run separately from Xactus360 is notable IMO b/c the verification platform was at the center of a very spicy 🌶️ lawsuit MeridianLink filed against Xactus in ‘23 & settled out of court last year. 

I’ve got a full breakdown for paid members of The Mortgage Scoop, including the backstory behind the litigation. Plus, what happens when borrowers can’t tell whether they’re talking to an AI voice agent & Rocket’s response to the RESPA allegations.

Midway through an unsolicited phone call w/ a Movoto rep about a listing, an annoyed Greg Sher asks if he’s speaking to a real person or an AI agent. The voice tells him that of course she is real & in fact lives in the Potomac, MD area, not far from Sher in Virginia. He’s not convinced & asks her what the weather is over there. But she… doesn’t know? It’s pretty weird.

"I've been indoor the entire time. I work remotely,” the caller says. “I don't want to tell you it's sunny and it's raining outside. Because then you'd be like, ‘Oh she's probably AI.’ Because I get this a lot."

I don’t know why she can’t just look out the window if she’s in Potomac, MD.

Anyway, Sher consulted Claude, which concluded there’s a “95% chance it’s AI.”

Most of the commenters on his now-deleted LinkedIn post agreed w/ Claude & were blown away at how hard it is to tell.

Personally, I think the caller is a real person purely b/c of the accent  – the caller misspeaks/mispronounces the words “property” & “indoors.” Some Lower/Movoto people also commented that it wasn’t AI.

Regardless, the video raises important questions about trust between customers & mortgage companies in the Age of AI.

Voice AI agents will soon be advanced enough to sound incredibly human. They’ll speak using filler terms (“like,” “umm,” “y’know”), have regional accents & maybe even say shit like “six-seven” or “fire” 🔥 to deceive w/ ease & at unprecedented scale. This is Cylon-level shit.

In UWM’s earnings call a few weeks ago, Mat Ishbia said that UWM has closed tens of thousands of deals via AI voice agent Mia. A fair number of customers had no idea “Mia” was an AI chatbot & carried on conversations w/ “her,” he said. Every lender will eventually be tempted to use this kind of tech & save on costs.

I’m not going to argue that humans doing call center work represents some great achievement in interpersonal relationship building. Those humans make mistakes & piss off customers all the time & can only work so many hours.

But moving to AI voice agents, IMO, crosses a chasm from which there’s no return. There’s already a growing anti-AI movement — just listen to the boos at college commencement speeches. Much of it is a reaction to the job market, but some of it is simply not knowing if you can trust that you’re reading someone’s actual words, watching a real video or talking to an actual person. This broader trust issue is spilling into real estate & mortgage & I don’t think the industry is prepared for the many potential pitfalls.

Back in January, Hagens Berman, the unlikely & unofficial successor to the CFPB, filed a RESPA lawsuit against Rocket, which reads a lot like the CFPB steering suit from the Chopra years.

Per NMN, Rocket last week responded to the lawsuit, noting that language in its “preserve & protect” policy only required agents to avoid interfering w/ a client’s pre-existing relationship w/ a lender. Attorneys for Rocket cited the safe harbor, in arguing that nothing in anti-kickback rules for originators prohibits payments, or referral payments, between real estate agents (Rocket Homes) & mortgage brokers.

I reported back in January that there is a fine line between a referral & steering.

Is it illegal under RESPA when someone sends you a customer & expects you not to send that customer to their competitor? What’s the line between a referral & steering? If Rocket sends a buyer lead to a real estate agent, naturally the firm expects that agent to encourage the buyer to work w/ Rocket. People are calling this a “reverse referral,” meaning the lead goes out, then comes “back.” Make sure to read Brian Levy’s excellent Mortgage Musings column about steering. He notes that RESPA bans payments for referrals but it does not ban expecting loyalty, cooperative business relationships or steering itself (UDAAP territory)...

This is further proof that RESPA should be massively reformed. Considering the multitude of legit RESPA issues (many MSAs, JVs are rife w/ harmful, deceptive kickbacks), this RESPA interpretation seems kooky to me. Let’s say a borrower calls an LO & the borrower needs a Realtor. The LO refers them to a Realtor. Obviously the LO expects the Realtor to not steer the borrower to a different lender, right? What’s deceptive about that?

Mortgage Scoop Insiders - I’ve shared the legal complaints in the now-settled litigation between MeridianLink & Xactus in the story below. I also have additional context around the deal that was announced on Wednesday. Not already a paid subscriber? You can upgrade here.