The collapse of a New Jersey-based net branch has some branch managers considering a class action lawsuit. In a lawsuit by one of its wholesale lenders, the company is accused of submitting more than $2 million in fraudulent loans that resulted in more than $1 million in losses.
Mid Atlantic Capital LLC is shutting down.
"It was official at 9:30 a.m. [Thursday]," the manager of one of Mid Atlantic's New Jersey branches, who ask not to be identified, told MortgageDaily.com. He was referring to an e-mail sent to branch managers by Don Forum, owner of the company.
The manager said the fact that Mid Atlantic was in trouble "was noticeable a week or two weeks ago. Checks were bouncing. Basically," he added, "everybody got screwed."
He and his five loan officers, he said, were owed "a decent amount."
The manager of a Florida branch, who also requested anonymity, told MortgageDaily.com that at 4:30 Wednesday afternoon, Forum told him that he "needed another 24 hours" to try to rescue his company.
"Obviously, he didn't make it," he commented.
He explained that, including himself and his 13 loan officers, "We are down over $30,000."
The Florida manager also noted that branch managers are considering a class action law suit over lost wages and mismanagement of funds.
"Corporate people," he added, "tried to do a number of things that caused them to go under."
Mid Atlantic's marketing team, he pointed out, was urging loan officers to place loans with Lending Tree but that, because of high rates and fees, there was a "great" fallout rate.
Forum, in his e-mail, blamed his company's closing on a drop in origination volume and the cost of dealing with legal actions taken by lenders attempting to recover their losses by filing suits against Mid Atlantic.
Those actions include an ongoing suit that First Franklin Financial Corp. filed against Mid Atlantic on Sept. 7, 2007, in U.S. District Court, District of New Jersey. In that case, Mid Atlantic is accused of submitting seven fraudulent loans files for more than $2.2 million that resulted in losses of more than $1.0 million.
Legal and accounting professionals are dealing with these issues, Forum, who did not respond to phone calls from MortgageDaily.com, said in the e-mail.
On its Web site, Mid Atlantic still says it "is licensed in numerous states and growing" and is "looking for branch managers."
The Sewell, N.J.-based company, which noted it launched in December 2001, had more than 600 employees in 75 branch locations operating in 23 states, according to its Web site.
But many of its branches had been closing.
Five of the branches MortgageDaily.com attempted to call had numbers that were non-working or not in service.
"Most of the branches are already switched over [to other companies]," the New Jersey branch manager said. "We're in the midst of it right now. We're now placing loans to other locations. So there's been no down time."
Similarly, the Florida branch manager said he will have a closing at another broker shop on Thursday for one of some 15 loans he now has in his pipeline.
First Franklin Financial Corporation, Plaintiff, v. Mid Atlantic Capital, LLC, Defendant.
Case 1:07-cv-04398-JEI-AMD, Sept. 7, 2007 (U.S. District Court, District of New Jersey)