Mortgage brokerage Eastern Union Funding recently decided to cut brokers’ fees in order to gain more business. But that didn’t sit well with some, and the company is now dealing with the fallout.
Eastern Union’s plan involved slashing its fees on Fannie Mae, Freddie Mac and CMBS refinancing deals from 1 percent to .25 percent. In response, a group of nine brokers at Eastern’s office in Howell, New Jersey, left last week and formed a new company to compete with their former firm.
Now, the company has filed suit, claiming the brokers violated their employment agreements by starting a competing firm, and stole files on their way out. The lawsuit, filed Wednesday, said the brokers were “vexed” by its decision to cut fees and “quickly became disgruntled.”
A representative for Eastern could not be immediately reached for comment.
Eastern also claims the dealmakers, who earned between $82,000 and $6.3 million in 2019, downloaded files and stole trade secrets on their way out the door. The company is asking the court to order a preliminary injunction preventing the brokers from competing with Eastern Union and soliciting its clients or employees.
The move was designed to gain market share from competitors charging the full rate, and also to reach out to customers in markets outside New York City that normally don’t use brokers to seek financing, Eastern Union president Ira Zlotowitz previously told The Real Deal.
Eastern focuses mainly on smaller and middle-market multifamily owners refinancing their properties. The company, which is headquartered in the Flatlands neighborhood of Brooklyn, works on producing a high volume of deals each year. The company claims it facilitates $5 billion worth of transactions each year from offices in New York, New Jersey, Maryland and Florida.
Contact Rich Bockmann at rb@therealdeal.com or 908-415-5229.