Creditors of a Florida-based mortgage lender are trying to force the firm into bankruptcy. The company is accused of holding back more than $2 million from investors on loans it services.
Federal Trust Corp. said Friday in a filing with the Securities and Exchange Commission that its subsidiary, Federal Trust Bank -- along with two other out-of-state financial institutions, filed a joint petition for involuntary Chapter 11 bankruptcy against TransLand Financial Services Inc.
Bankruptcy court documents indicate Tier One Bank and MidCountry Bank were the other two petitioning creditors.
Maitland, Fla.-based TransLand is accused of failing to remit $2.4 million it collected on 10 loans that were paid off. TransLand reportedly services 66 residential construction loans for $11.7 million under a servicing agreement with Federal Trust -- which said an accounting firm has been hired to conduct a comprehensive forensic audit.
"The bank has terminated the servicing agreement and all of the individual loan files are now in the possession of the bank," the filing said. "Going forward, the bank will have direct contact with the customers for collection or workout of the loans."
TransLand, which was rumored to have collapsed earlier this month, told MortgageDaily.com that it was still actively funding wholesale loans -- though it had laid off of 18 account executives and made strategic reductions.
Following a hearing, U.S. Bankruptcy Judge Arthur B. Briskman signed an order continuing the hearing until Aug. 31 and appointing an examiner "to investigate and report on the proposed debtor and any entity owned or controlled by the proposed debtor," according to court records. "The appointment of an examiner is in the best interest of all creditors."
The judge also approved disbursements, utilizing warehouse lines from Washington Mutual and UBS Real Estate Securities, on loans TransLand had in the process of closing.
TransLand, approved as a seller-servicer by Fannie Mae, Freddie Mac and Ginnie Mae, operates in 14 states through 2,000 approved mortgage brokers, a court filing indicated. It claims to be "one of the largest privately-owned residential construction lenders" in the country with an $0.5 billion portfolio and $60 million in monthly originations.
A company executive told MortgageDaily.com earlier this month that TransLand had 113 employees and was licensed in 26 states.
"The putative debtor management has originated and administered over 30,000 construction-permanent loans over the past 20 years," the company said in one court filing.