Ari Karen a partner at Offit Kurman and CEO of Strategic Compliance Partners wrote an article last week in National Mortgage News regarding a practice as old as the mortgage industry that we, back in the day, called pirating. I had an experience with pirating as an employee of a branch of a large national firm back in the 80s. The manager of my branch called a meeting and informed the employees of the branch that we would all be employed by another company starting the first of the month. In my youth and ignorance, I happily followed along. The good times didn’t last long though, our previous employer sued our new employer as well as the loan officers that left.
There is a right way and a wrong way to switch from one lender to another and making the wrong choice rarely creates a business advantage. A California jury’s decision last month against a lender $25 million is a testament to that. The verdict was based upon the fact that the lender encouraged its new hire by attaching a bonus to the initial period of employment for engaging in actions constituting a data breach.
In most cases, employees leaving a lender show little consideration of the fiduciary duties owed to the prior lender, nor the fact that most of the information they have access to may be considered trade secrets and/or information proprietary to that employer. Further, the lenders hiring these individuals similarly often fail to appreciate the role they can play in promoting or incentivizing such practices.