More than 80 employees face unemployment as the owners of a northern Ohio-based mortgage company, frustrated by the state of the industry and concerned about hard times ahead, have decided to get out.
David Dillen and his partner, Fran Zupancic, are retiring and closing Colony Mortgage Corp. The Fairview-based company has 88 employees at nine Ohio and Indiana offices and has been operating for 22 years. Its headquarters is located near Cleveland.
"Can you blame me?" Dillen, 58, asked in an interview with MortgageDaily.com.
Dillen, who said he's been at it for over 30 years, noted he's never seen it this bad.
"With all the foreclosures, prices are being driven down, appraisals are hard to get," he said. "It's just not a pleasant industry to be in right now -- so we're getting out."
The mortgage broker said he considered selling, but with the state of the industry there are no buyers.
Colony reportedly originated $209 million last year.
While 97 percent of Colony's business was conforming as of late, it had done business in creative loans. But that well has run dry, giving Dillen further enticement to leave the business.
"With the foreclosures, we saw the first big batch in '06," he said. "Then another batch in '07. I don't see an end to it for a couple of years."
Dillon puts much of the blame for the industry crisis on the industry, with brokers securing loans that never should have been made.
"There were too many easy payment option ARMs, other ARMS', Alt-A loans and other loans ... that seemed to push too hard to make it easier for people to borrow, but the pendulum went way too far," he said. "You've seen this machine approving people with 50 percent debt ratios. How can you do that? What are people going to live on after they pay their mortgage?"
Some customers called wanting loans, but Dillen said he wouldn't take their business because he knew the borrower could not afford the payments. He said those customers had no problems getting loans elsewhere.
Dillen believes more problems are on the horizon as people try to keep their houses.
"The (Federal Reserve) is talking about easing up on credit, trying to keep people in their houses," he said. "Who is going to buy that loan and buy that paper? Were they good buyers before their ARM went from five to 10 percent, or did they get a loan with no income, no asset verification? Who is going to make them a loan?
"A lot of people still aren't going to be able to make it," Dillen predicted.
Colony reportedly settled with the U.S. Department of Housing and Urban Development last August for $38,000 and agreed to indemnify HUD on two loans. In addition to numerous underwriting deficiencies, Colony was cited for sponsoring loans from an unapproved entity.