Mortgage lender Plano files for bankruptcy after cutting 75% of staff

The Plano-based mortgage lender that laid off 428 employees last week has filed for bankruptcy, citing pressures in the mortgage industry due to rising interest rates and housing affordability.

First Guaranty Mortgage Corp. has filed for Chapter 11 bankruptcy protection in the District of Delaware, citing significant operating losses and cash flow problems due to tough market conditions, the company said Thursday.

The company stopped taking loan applications before filing them, a company representative said.

“While we have made significant efforts to address our financial challenges related to the state of the mortgage market, ultimately we must do what is best for our borrowers and our consumers,” CEO Aaron Samples said in a statement.

The company said it suffered significant revenue losses and struggled to secure financing due to the mortgage market.

“The sharp and unexpected drop in performance reflects the intense pressure on mortgages due to the dramatic collapse of the mortgage refinancing market and the weakening of the mortgage purchase market, which suffered from a lack of housing stocks and growing affordability issues,” First Guaranty said. .

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First Guaranty said it was the “right and responsible way” to protect its business while exploring restructuring options. It retained some of its staff to manage day-to-day operations.

The lender strives to accommodate borrowers who have started but have not yet completed the loan process. Closed mortgages are already managed by third parties.

The company said its assets and liabilities are each estimated to be over $500 million, up to $1 billion. Its largest unsecured creditor is Customers Bank, which owes $25 million.

Some of the terminated employees were working remotely from out of state, according to a notice the company provided to the Texas Workforce Commission. The company said it has paid accrued salaries, vacation pay and commissions and is in the process of paying severance pay to eligible employees.

First Guaranty Mortgage Corp. was founded in 1987. It acquired Charlotte-based in 2016 and moved its headquarters to Plano in 2019, according to its website.

Other home lenders have made significant job cuts in response to lower demand for mortgages, particularly in the refinance sector. JPMorgan Chase & Co. laid off more than 1,000 employees last week and Wells Fargo is also laying off and reassigning home loan employees, Bloomberg News reported. Other real estate companies such as Redfin and Compass have also recently cut jobs due to the slowdown in the national housing market.

Nationally, refinance applications are down 80% and purchase loans are down 20% from a year ago, according to the Mortgage Bankers Association.

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