The lawsuit that prompted Federal Trade Commission (FTC) Chairman Andrew N. Ferguson to issue a warning letter to Mortgage Connect last week has dealt the company a significant legal blow.

As the FTC scrutinizes Mortgage Connect for deploying “unjustifiable noncompetes,” a Pennsylvania judge ruled that the company’s contract was so “sweeping” and “overbroad” that it’s completely unenforceable. This dual pressure indicates Mortgage Connect is facing intense heat from courts and federal regulators alike.

On Monday, Judge Mary C. McGinley denied the company’s motion for a preliminary and permanent injunction.

In the case, filed in 2025, Mortgage Connect sought to enforce a confidentiality agreement signed in August 2022 by Melissa Harvey, a former senior vice president. Harvey, who previously oversaw the company’s single-family rental and mortgage default divisions, left the company in May 2025 to join First Title, a smaller competitor and co-defendant, as vice president of operations.

Neither Mortgage Connect nor First Title immediately replied to HousingWire‘s requests for comment.

Judge McGinley deemed the noncompete contract‘s one-year duration reasonable but struck down its nationwide geographic scope, which would have restricted Harvey from virtually any activity in the mortgage industry.

“The restriction prevents Harvey from working anywhere in the United States in the industry that has been her livelihood for her working life,” McGinley wrote. 

Regarding confidentiality, the judge noted that Harvey returned all Mortgage Connect documents and devices upon her departure, with no evidence that she retained, misused or shared proprietary information. Furthermore, Harvey did not create Mortgage Connect’s proprietary software (E-Connect) and lost access to it when she resigned.

The court also found no breach of customer nonsolicitation clauses. Harvey’s role was deemed operational, not client-facing.

“In the mortgage services industry, customers are not exclusive; the customer base is largely known throughout the industry or is otherwise readily identifiable through public sources,” the judge noted, adding that no other Mortgage Connect employees left for First Title.

In light of the case, the FTC urged Mortgage Connect to review and potentially discontinue restrictive covenants that may violate federal antitrust laws.

“Mortgage Connect may have broadly deployed unjustifiable noncompete agreements in employment contracts with potential adverse effects on workers and competition,” Ferguson said in a statement.

The FTC launched a Joint Labor Task Force in February 2025 to prioritize enforcement against deceptive, unfair and anticompetitive labor-market practices.

The Mortgage Connect lawsuit also includes counts of breach of contract and tortious interference against Harvey and First Title.