$23M Dispute Over Mortgage Subservicing Ends in Confidential Settlement

Freedom Mortgage Corp. and LoanCare LLC have reached a confidential resolution, ending their dispute over a subservicing agreement that resulted in a $23 million jury verdict. The announcement came via a joint motion filed on June 12, 2025, in the U.S. Court of Appeals for the Third Circuit, requesting a continuance of scheduled oral arguments. The filing noted that the parties had reached a "mutually agreeable resolution of this matter, including this appeal."

The litigation originated from a federal jury verdict delivered in July 2023 in New Jersey, awarding $22.6 million to LoanCare. The jury sided with the subservicer on claims that included conversion, fraudulent inducement, and unjust enrichment. Freedom Mortgage had contested the outcome, arguing that the trial court had erred by excluding expert testimony and asserting that LoanCare's claims were precluded by their contractual agreement.

The Allegations

At the center of the dispute was a subservicing agreement between the parties that spanned from 2010 to 2016. Under the arrangement, Freedom Mortgage paid approximately $52 million to LoanCare to manage and maintain certain mortgage loans. Problems arose when LoanCare allegedly failed to meet critical filing deadlines related to defaulted loans, impairing Freedom’s ability to recover principal and interest. The lender also claimed that LoanCare neglected to pursue necessary deadline extensions, leading to substantial losses.

LoanCare, in turn, filed counterclaims accusing Freedom Mortgage of wrongfully taking $22.6 million in escrow funds. According to LoanCare, Freedom refused to return the funds or provide any documentation justifying the retention, which became a focal point of the conversion claim.

The Appeal

Following the jury’s decision, Freedom Mortgage mounted an appeal with the Third Circuit, seeking to overturn the verdict. Their arguments focused on the trial court’s exclusion of expert witnesses and an interpretation of the subservicing contract that, they argued, shielded them from LoanCare's legal theories. However, as the appeal progressed, both parties opted for a negotiated resolution before oral arguments could proceed.

The terms of the settlement remain undisclosed, but the dismissal of the appeal signals the end of the contentious litigation.

Law Firms Involved

Freedom Mortgage was represented by attorneys Robert M. Palumbos, Wayne A. Mack, and Brad D. Feldman of Duane Morris LLP.

LoanCare's legal team included Stuart H. Singer and Evan Ezray of Boies Schiller Flexner LLP, Robert J. Lack and Andrew M. Englander of Friedman Kaplan Seiler Adelman & Robbins LLP, and David R. Fine of K&L Gates LLP.

What’s Next?

With the appeal withdrawn and the parties having reached a private agreement, the case concludes without further court intervention. While neither company admitted wrongdoing as part of the settlement, the resolution brings closure to a dispute that highlighted the complexities and risks inherent in large-scale mortgage subservicing arrangements. The case, Freedom Mortgage Corp. v. LoanCare LLC, will no longer proceed in the U.S. Court of Appeals for the Third Circuit.