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Former Branch Operation Bankrupt

Oak Street files chapter 11

June 11, 2007


photo of Patrick Crowley
A mortgage company based in Central Indiana -- which at its peak employed more than 700 employees, operated a branch network and generated more than $50 million in annual revenues -- has filed for bankruptcy protection.

Oak Street Mortgage LLC was once growing so rapidly that it contemplated a public offering of stock that could have raised millions of dollars.

But the company, which sold off retail lending offices and other assets last fall, has filed for Chapter 11 bankruptcy.

Oak Street, headquartered in Carmel, has between one and 49 creditors as well as assets and liabilities of between $1 million to $100 million, according to its federal bankruptcy court filing.

The ranges are broad because companies filing for Chapter 11, at least in the early stages of seeking protection under the federal bankruptcy laws, are not required to divulge more specific information.

Oak Street, founded by former Bank One executive Steve Alonso, could not be reached for comment.

An online analysis by Manta.com, which tracks business activity, indicated Oak Street was founded in 1999 and, at its peak, had 750 employees and estimated annual sales revenue of $58.4 million.

Hoovers, which tracks company's business activity and finances, said in an online report that Oak Street had planned to sell stock and establish itself as a publicly traded Real Estate Investment Trust, or REIT.

But the company "withdrew its initial public offering registration in 2005, citing unfavorable market conditions," Hoovers said.

Last summer, three former Oak Street originators filed a federal lawsuit claiming the company improperly withheld overtime pay from their wages. Subsequently, more than 125 other originators from around the country joined the litigation.

"It's going to be an enormous case," the plaintiffs' attorney Donald H. Nichols told MortgageDaily.com at the time.

He noted his firm had already handled about 22 loan officer cases over the last several years and won each one of them -- resulting in $60 million in wages being collected for the workers.

The following September, Oak Street exited residential originations, selling 21 retail branches and other assets to NovaStar Financial Inc. It intended to continue its commercial lending under the Oak Street Funding brand.

At the time, NovaStar said the sale was expected to boost production by as much as $100 million. NovaStar retained about 500 of Oak Street's employees.

Patrick Crowley is a feature journalist and blogger for MortgageDaily.com. He is also a reporter, blogger and columnist for The Cincinnati Enquirer.
e-mail Patrick at: [email protected]

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