A federal judge in Maryland has rejected loanDepot's attempt to dismiss a proposed class-action lawsuit. The suit accuses the mortgage lender of violating federal loan officer compensation rules and steering borrowers into mortgages with higher interest rates and fees.
U.S. District Court Judge Julie R. Rubin denied loanDepot's motion to dismiss for failure to state a claim and for lack of jurisdiction. She ordered the company to respond to an amended complaint filed by the plaintiffs.
The core of the lawsuit centers on alleged violations of the Truth in Lending Act (TILA)'s loan originator compensation rule, which prohibits paying loan officers based on a loan's terms or interest rate. Judge Rubin found that the plaintiffs adequately alleged a concrete financial injury by claiming they paid higher interest rates and fees tied to the lender’s alleged steering and compensation practices.
Rubin noted that while case law on higher interest rates as an injury stemming from steering due to LO Comp. Rule violations is limited, federal courts routinely accept such allegations as sufficient to establish an injury in fact at the pleading stage. She also stated that traceability requires only allegations sufficient to show a causal connection between the injury and the conduct complained of that is not "highly attenuated."
The lawsuit was initially filed in July 2025 and amended in October 2025 by plaintiffs Nathan Johnson, Rachel DeBaun, Nathan Moore, and Shawn Derrick. They allege a single count of TILA violation, claiming loanDepot used a rate-based compensation system that rewarded loan officers for placing borrowers into more expensive loans. Each plaintiff obtained a loan from loanDepot between September 2019 and June 2021.
LoanDepot argued that the claims were time-barred, citing TILA's general three-year statute of limitations. However, Rubin found dismissal on timeliness grounds "premature," as the plaintiffs plausibly alleged that loanDepot concealed the scheme and that they did not discover it until December 2024 or later. The court acknowledged that the plaintiffs' allegations were "not terribly detailed" but concluded they were sufficient to proceed past the pleading stage and into discovery.
