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Calif Company Dumps Wholesale Ops

Pacific American, GEM Capital close down

August 15, 2007


photo of Coco Salazar

The credit liquidity crisis has forced a California-based company to shut down its wholesale operations -- leading to the collapse of two subsidiaries.

As of Tuesday, Golden Empire Mortgage Inc. halted wholesale lending operations, resulting in the closure Pacific American Mortgage Co. and GEM Capital Funding -- both predominantly Alt-A originators, Golden Executive Vice President Rick Roper told today.

"We made the decision due to the obvious unprecedented lack of liquidity in the market," Roper said. "The market segment that we were attempting to serve is no longer available for us to continue to offer."

As others have been pushed to do, Bakersfield, Calif.-based Golden will concentrate on retail conforming and government loans, categories with liquidity that allow financing until confidence is restored in the credit markets, Roper said. He emphasized that unless mortgage lenders are depository institutions, the type of loans they can fund are limited. Golden had over of 35 funding sources at one point but has reduced the number to 15 that are banks in nature.

Pacific American has a skeleton crew of about 13 employees winding down operations in Roseville, Calif. Over the past six months, market conditions led to the layoffs of 20 administrative employees in the Roseville office and about 15 account executives spread throughout California and Nevada, Pacific American senior underwriter Debbie Balich told

"The parent company is just amazing and they did everything they could to help us," Balich said. "This isn't just about us ... this is a problem about the trust in our economy."

We're "affected by fraud in the market, ARMs that cannot be refinanced because of prepayment penalties, [and] the equity is not here," Balich said. "Wall street doesn't have confidence anymore in loans that are not full doc."

GEM Capital consisted of two branches in Livermore, Calif., and Portland, Ore. While the unit had also been reducing staff, yesterday's decision affected 15 to 20 employees, according to Roper.

Golden Empire still has in excess of 700 employees and "what we're doing going forward is to focus on our retail division," Roper said. Retail loans account for about 80 percent of its overall volume, which last year totaled about $2 billion.

"If the market turns around, there might be chance to reconsider [wholesale], but right now it is not a viable business strategy," Roper said.

Coco Salazar is an associate editor and staff writer for

e-mail: [email protected]

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