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The recent decision in California in favor of Irvine-based, Mount Olympus Mortgage against Guaranteed Mortgage and a former Loan Originator, for corporate espionage (stealing loans) has lenders reviewing their contracts and employment agreements with their LOs.
These contracts need to cover more than just compensation. They should also specifically spell out who “owns” the customer and what happens if, and when, an originator leaves their employment with the lender.
It is all too common in the mortgage lending business for an originator to move from one company to another and, in doing so, attempt to take the loans in their pipeline along with them. After all, they originated the loans, they are not yet closed, so when closed shouldn’t the originator get the commission? They brought that customer into the company. Not so fast…
When does a consumer stop being an originator’s customer and start being a customer of the company that the originator work for when the process started? Opinions vary. But, for the most part, the consumer is a customer of the originator right up until the time the originator registers their loans with the company. At that point, the company becomes the owner of that consumer’s loan application.
The company begins to incur expenses to service that applicant. The customer information may still belong to the originator for the purpose of future contact. After all the LO took the time, and expense, to cultivate the relationship, but any loan in question belongs to the lender employing the LO at the time.
To avoid problems and ugly lawsuits, remember that if an originator decides to move on, or the company decides to break ties, the LO’s employment agreement should clearly spell what happens to the loans in the pipeline.
Make it clear that once an application is received by the company, that application becomes the property of the company. In addition, the agreement should clearly reflect exactly what happens when the parties split, for whatever reason.
How is the pipeline handled and how is the originator compensated, if at all, when they leave the employment of said company? There are a number of ways to do this. Regardless of how it is decided and agreed upon, it must be clearly documented in a written agreement, that is signed by all parties. Leave nothing to the imagination or speculation. So let it be written; so let it be done.
After all, can anyone, or any company, really own a customer. I think the best thing to do is properly service the customer and they will become your customer for life.
