Chase Sues Mortgage Vendor for $20M-Plus
- 20 May, 2000 12:01
BOSTON (05/20/2000) - Yet another suit has been filed against online mortgage technology provider Mynd Corp. This time, customer Chase Manhattan Mortgage Corp. is suing the embattled Columbia, South Carolina, vendor for more than $20 million, claiming that Mynd's mortgage software was late and didn't perform as promised.
Mynd, formerly known as Policy Management Systems Corp. (PMSC), has been sued by both shareholders and competitors this year. the shareholders accused the firm of inflating its numbers, and competitors charged it with stealing trade secrets.
Officials at New York-based Chase declined to comment on the suit. But Mynd Executive Vice President Stephen Morrison said the companies are trying to reach an "amicable resolution of our differences."
For Chase, the problems lie with Mynd's LoanXchange System, a client/server mortgage origination package developed by Mynd subsidiary Cybertek. According to the Chase lawsuit, filed in February in U.S. District Court in Texas, the software was delivered late, wasn't up to specifications and simply didn't work.
"The big lesson here is, don't overpromise and underperform," said Jamie Punishill, an analyst at Cambridge, Massachusetts-based Forrester Research Inc.
But analyst Richard Biedle at Needham, Mass.-based TowerGroup said major lenders like Chase might be exacerbating the mortgage origination process by trying to electronically link customers to third parties such as appraisers, title agencies and mortgage insurers.
On a more positive note, Mynd's operating losses improved from $70 million in the fourth quarter last year to $16 million in the first quarter this year, the company announced last week. The company attributed $5.2 million of its first-quarter loss to customer dispute and litigation costs and another $7.6 million to restructuring costs arising from reductions in staff.
Mynd's financial problems follow other legal challenges.
On Jan. 13, Computer Sciences Corp. filed suit against PMSC, Mynd's predecessor, alleging it misappropriated trade secrets. On Jan. 7, PMSC said it wouldn't meet analysts' estimates for the final three months of last year.
Three shareholders' lawsuits have since been filed.
In an ironic twist, Mynd last week announced seminars it plans to run with Microsoft Corp. focused on Mynd's LitigationAdvisor software for managing litigation.