HARTFORD, CT - Attorney General Richard Blumenthal and Department of Consumer Protection (DCP) Commissioner Edwin R. Rodriguez sued CTX Mortgage Company for illegally raiding its competitor for employees and secret consumer lists.

Nevada-based CTX operates a residential mortgage financing office in Milford. One of its competitors, Charter Oak Lending, LLC, provides the same services out of Danbury doing business as Danbury Mortgage.

In September 2004, CTX met with one or more employees of Danbury Mortgage at a training conference in which it allegedly began a strategic effort to recruit Danbury Mortgage employees over the following months and years.

In exchange for bonuses and other benefits, CTX used these employees to continue recruiting additional employees from Danbury Mortgage and access confidential information about its competitor, including consumer lists, loan applications and referral sources. CTX eventually opened an office in the Danbury area staffed entirely with employees it recruited from Danbury Mortgage.

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Everyone involved in the mortgage business got rich during the housing boom, including Wall Street. The biggest firms bought all the loans they could get their hands on, repackaged them, and sold them for a fee to hedge funds and other investors. Mortgage-backed securities issuance soared from $184.5 billion in 2000 to nearly $1 trillion in 2005, generating more than $1 billion in fees last year.

But now that the real estate tide is ebbing, trash is starting to wash up on shore. Mortgage delinquencies are zooming — bad news for the banks, Wall Street firms, and investors holding loans.

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Bill Coppedge

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