Borrowers accuse CrossCountry of kickback scheme

Six North Carolina borrowers are suing CrossCountry Mortgage and a local brokerage for an alleged kickback scheme disguised as a co-marketing agreement.

The lawsuits claim the retail lending giant paid Raleigh Realty $15,000 a month between 2021 and 2022 in exchange for exclusive leads. The near-identical complaints include screenshots of purported text messages by the brokerage's president to agents urging them to stop referring clients to other mortgage lenders. 

"We believe the alleged kickbacks and exclusive referral arrangement deprived our clients of the ability to shop around for better mortgage rates, causing them to lose substantial amounts of money," wrote Christopher Bagley of Maginnis Howard, in an email Friday. "We look forward to proving our cases."

Maginnis Howard filed the lawsuits between June and July. They all say CrossCountry Executive Vice President Charles Shackelford, who is not a named defendant, orchestrated the improper payments and escalated approval for the co-marketing contract to executives. 

CrossCountry doesn't comment on pending legal matters, a spokesperson said Friday. Ryan Fitzgerald, president of Raleigh Realty, didn't return messages seeking comment. 

How the alleged scheme unfolded

The lawsuits, which don't describe how plaintiffs learned of the scheme, accuse the companies of entering their fraudulent co-marketing agreement with a digital marketing firm in early 2021. CrossCountry and Raleigh Realty purportedly agreed to each pay $15,000 per month for those marketing services, although the real estate firms allegedly agreed to the kickbacks before inking the deal. 

The lender's marketing managers warned executives that Shackelford's expedited procedure to approve the contract circumvented company policy and violated RESPA, the complaints said. 

Shackelford told Fitzgerald he expected an average kickback of about $500 for each referral, the lawsuit claims. Fitzgerald, also not a named defendant, reprimanded and suspended agents when they didn't refer clients to CrossCountry. 

"This is taking money out of my pockets when you do this," read one of the purported messages from the brokerage head to an agent.

In May 2022, Shackelford allegedly threatened to cut off the kickbacks when he noticed a downturn in referrals, around the time when interest rates began their steep climb. CrossCountry terminated the agreement at an unspecified later date when it concluded the referrals were insufficient. 

The lawsuit also notes Shackelford had been sued in the past; the executive was accused of spearheading a poaching and theft of trade secrets scheme, when he departed Homeside Financial for CrossCountry, in 2018. That case was settled for undisclosed terms.

Plaintiffs today seek unspecified damages for violations of both RESPA and the North Carolina Unfair and Deceptive Trade Practices Act. Each complaint details plaintiffs' individual loan originations with CrossCountry, and describes potential lower rates and fees they could have paid if they weren't steered. 

CrossCountry hasn't yet filed responses in the lawsuits. The Cleveland, Ohio-based firm has battled numerous lawsuits in recent years, although more so from competitors and former employees. 

Competitor Rocket Cos. also recently faced accusations from feds of orchestrating a kickback scheme with a large brokerage. The Trump administration tossed that complaint a month after taking office.