West Capital Lending is facing mounting legal pressure from rival lenders and a former employee after withdrawing its federal lawsuit accusing loanDepot of unlawful loan officer compensation practices.

The Irvine, California-based brokerage voluntarily dismissed the case without prejudice on Oct. 20, three weeks after a federal judge found it had failed to sufficiently connect loanDepot's alleged compensation violations to its own financial losses.

Meanwhile, loanDepot is pursuing separate allegations involving employee recruitment and confidential borrower information. Griffin Funding is seeking millions in damages over alleged customer diversion, and a former West Capital employee has brought wage-and-hour claims.

The disputes put several industry practices under scrutiny, including LO compensation, employee classification, and ownership of borrower leads.

Federal Judge Finds West Capital Lacked Standing

West Capital sued loanDepot in March, alleging the lender's production manager compensation structure violated the Truth in Lending Act and Regulation Z by tying incentive pay to loan pricing and profitability.

The brokerage claimed the arrangements encouraged managers to offer higher-priced loans while selectively discounting rates to undercut competitors.

But U.S. Magistrate Judge John D. Early found that West Capital had not plausibly demonstrated how the alleged violations caused its competitive losses.

"Many businesses can and do undercut competitor prices without...

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