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128 Originators Suing Employer

Oak Street Mortgage case involves overtime

September 27, 2006

WASHINGTON correspondent for MortgageDaily.com

A lawsuit against an Indiana-based mortgage company now includes 128 mortgage originators as plaintiffs -- and the number is still growing. The attorney who filed the case has a stern warning for other mortgage employers.

Oak Street Mortgage is being sued in federal court by a rapidly growing number of loan officers who claim that the company improperly withheld overtime pay from their wages.

While three former originators for the Indiana-based mortgage broker initially filed the lawsuit this summer, more than 125 others from around the country have since joined the litigation. And the number is expected to increase.

"It's going to be an enormous case," predicted plaintiffs' attorney Donald H. Nichols from Minneapolis, Minn.

Nichols said he expects the workers to prevail. He explained that such cases often involve two issues -- liability and damages. While the company hasn't admitted liability, he said when the fight revolves around damages -- as it does in this case -- that victory for the loan officers can be expected.

He dismissed Oak Street's legal defense as weak. He said the company's story is simply that its loan officers don't work overtime. However, he said, his firm has found 130 people from all over the country who say they did work the extra hours.

Oak Street's attorney did not return calls for comment.

The plaintiffs first involved in the case worked in Oak Street's West Palm Beach office. Oak Street Mortgage opened its doors in 1999. Headquartered in a suburb of Indianapolis, the company operates in 34 states. The workers claim the company violated the Fair Labor Standards Act by not paying them overtime.

The act, the federal law that regulates employer pay practices, requires employees to be paid the federal minimum wage for all hours worked and time and one-half the regular rate of pay for hours worked over 40 in a work week, unless the employee is exempt from overtime pay under one of several allowed exemptions from the minimum wage and overtime requirements.

The plaintiffs are asking for unpaid back wages, interest and attorneys' fees and costs.

Nichols also offered a warning for the industry.

He said that his firm has handled about 22 loan officer cases in the last several years and has won every one of them. He said his firm's wins have resulted in $60 million in wages being collected for the workers. "It's clear that on loan officer cases -- the kind of loan officers they have these days -- [mortgage broker firms] should be paying overtime," he said.

NovaStar Mortgage Inc. recently announced it purchased 21 retail mortgage lending offices from Oak Street in a deal expected to close next quarter. The acquisition means that the Missouri-based nonprime lender will create a new retail division by expanding beyond the current focus of customer retention programs.

Oak Street, which will remain headquartered in Indianapolis, will exit the residential origination market and continue its commercial lending under the Oak Street Funding brand.

Lisa D. Burden is a legal analyst for MortgageDaily.com and holds a law degree from the University of Maryland. She is currently a freelance journalist who previously wrote for Institutional Investor publications and the Baltimore Daily Record.

e-mail Lisa at: [email protected]

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