Non-QM lender lender lays off three-fourths of workforce, saying it’s experienced “significant operating losses and cash flow challenges” and has been unable to obtain funding.
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Saying it’s experienced “significant operating losses and cash flow challenges” and has been unable to obtain funding — a Texas-based national mortgage lender that specializes in riskier “non-QM” loans laid off three-quarters of the employees assigned to its headquarters office on Friday.
The sudden and unexpected layoffs at Plano, Texas-based First Guaranty Mortgage Corp. have left borrowers and FGMC’s wholesale and correspondent lender partners in the lurch, according to former employees. The layoffs were first reported by HousingWire on Friday, quoting anonymous former employees who said the company had “essentially shuttered,” after a major investor divested its stake in the company.
FGMC did not respond to Inman’s requests for comment. But according to a letter the company sent to Plano, Texas Mayor John B. Muns, FGMC fired 428 of the 565 workers who were assigned to its headquarters office, on June 24.
“FGMC has experienced significant operating losses and cash flow challenges due to unforeseen historical adverse market conditions for the mortgage lending industry, including unanticipated market volatility,” the letter said of layoffs affecting 76 percent of the company’s workforce. “In addition, FGMC’s recent efforts to obtain funding that could have prevented this layoff have proven unsuccessful.”
The letter, which Inman obtained from the Texas Workforce Commission, said many of the laid off employees lived outside of Texas.
Posts by former employees on LinkedIn also described sudden, unexpected mass layoffs.
Alicia Brisbane, whose 3 1/2 years with FGMC included nearly 3 years as vice president of correspondent lending, posted that, “Nearly 500 hard working, dedicated employees were laid off as FGMC shuttered its doors,” and pleaded with her connections to consider them for open roles. “If you are looking to grow your company please keep all of these former FGMC employees in mind.”
Another former FGMC executive, Vice President of Policy Stacy Leighton, said she “felt like family” during her 8 years at the company, “until last Friday when the majority of the staff was abruptly released.”
“I had a stellar team, committed colleagues and the support of an amazing boss,” Leighton said in a LinkedIn post. “Under my direction, the Credit Policy team moved the needle.”
According to the Nationwide Mortgage Licensing System and Registry, FGMC was formed in 1987, is licensed in 49 states and sponsors 164 mortgage loan originators, working out of 20 active branch locations.
FGMC announced a new stand-alone second lien program on June 15, calling it “an exciting new addition to the company’s already robust suite of proprietary Non-QM products, Maverick Solutions.”
Non-QM loans, which don’t meet underwriting standards for so-called “qualified mortgages” eligible for purchase by Fannie Mae and Freddie Mac, can be more difficult to bundle into mortgage-backed securities that are sold to investors.
It wasn’t just FGMC’s employees who were left in the lurch, but the company’s lender partners and borrowers.
Dani Hernandez, vice president of mortgage at Auston, Texas-based UpEquity, posted an open letter to FGMC on LinkedIn, saying her company was one of “many lender partners” left in the lurch after the company went “radio silent.”
An anonymous employee told HousingWire that the layoffs came on the heels of a failed attempt by a major FGMC stakeholder — the investment management firm PIMCO — to sell part of its stake in the company. When that failed, PIMCO “completely divested,” the source told HousingWire.
A PIMCO spokesperson told Inman the company had no comment.
FGMC is just one of a number of mortgage and real estate companies to downsize in recent weeks, as the Federal Reserve’s efforts to combat inflation by raising interest rates raise worries about a decline in home sales and a potential recession.