For many in the housing industry, the allegations in the antitrust lawsuit filed earlier this week against Optimal Blue and scores of top mortgage lenders sounded rather familiar.
Filed in U.S. District Court in Nashville by four homeowners who used a mortgage to finance the purchase of their homes, the lawsuit alleges the defendants have eliminated genuine price competition when it comes to mortgage rates due to Optimal Blue’s real-time price analytics tool.
The suit is seeking class-action status that includes anyone who purchased a home since 2019 with a residential mortgage that was priced, originated or sold by any defendant using Optimal Blue’s pricing and analytics tools.
Déjà vu all over again?
The 81-page complaint claims that the lenders who share information about their loans on Optimal Blue are part of a “cartel,” and that it’s an example of “concerted action.” If these terms ring a bell, it’s because these exact words were used to describe real estate brokerages and Realtor associations in the commission lawsuits.
“With the allegations, I see similarities in the way it describes lenders using the Optimal Blue software to share pricing data, which the suit claims is effectively leading to coordinated rate inflation and a price fixing scheme,” said Marx Sterbcow, the managing attorney of Sterbcow Law Group.
“In the commission lawsuits, agents were putting their commissions in the MLS, and you could see what the seller or their listing agent was willing to pay the buyer’s agent. And the argument was that sharing that information inflated fees. So, to me, they are very similar.”
Harrison McAvoy — a partner at Shinder Cantor Lerner LLP who specializes in antitrust law — thinks that the Optimal Blue suit shares some basic similarities with the commission lawsuits. But he also feels it much more closely resembles the antitrust litigation against rental pricing software firm RealPage.
McAvoy has a good reason to feel this way. The lawsuit against Optimal Blue was filed by the same plaintiffs’ attorneys, including those at Scott & Scott Attorneys at Law LLP., who filed the class-action suit involving RealPage. That case was recently settled for $141 million split among 26 defendants.
And like the suit against Optimal Blue, the RealPage suit was also filed in U.S. District Court in Nashville.
“In terms of the theory of competitive harm, this suit falls under the category of a developing area of the law, often referred to as algorithmic conspiracy. It also has a theory of anticompetitive information exchange,” McAvoy said. “This is all really about alleged coordination of pricing by originators through an information exchange and through pricing recommendations.”
Systemic antitrust concerns
For many of the antitrust experts consulted by HousingWire, the Optimal Blue suit is nearly a a carbon copy of the RealPage suit. That’s because both cases rest on the exchange of information and alleged algorithmic collusion facilitated by a central hub — which in the new suit is Optimal Blue.
As McAvoy sees it, the only real similarities this lawsuit has with the commission lawsuits is the antitrust nature of the claims, and the fact that both types of allegedly inflated fees impact closing costs.
Looking ahead, McAvoy expects the Optimal Blue lawsuit to highlight the nuances of the mortgage industry, as there will be differences in how different lenders have used the software.
But while some may have been surprised by this lawsuit, Sterbcow feels it aligns perfectly with the increased antitrust scrutiny on technology companies.
“Right now it seems to be anything involving technology — that is the focus. We saw it recently in the Federal Trade Commission’s lawsuit against Zillow and Redfin,” Sterbcow said. “If there is something out there that creates potential antitrust issues that are systemic to consumers and that they might not know about, that is where we are going to see action, especially from states or the federal government.”
