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The Mortgage Graveyard
Failed, closed and a c q u i r e d mortgage-related entities.

Warehouse Influenza Claims Another Casualty

Residential Loan Centers fails on Feb. 15

February 25, 2009


Another mortgage banker has been squeezed out of business by the loss of its warehouse line. A former rival that is on the prowl for potential acquisitions has stepped in to help the failed firm's stranded borrowers and has already hired some of its 200 former employees.

Residential Loan Centers of America Inc. shut down on Feb. 15.

The company, based in the suburbs of Chicago, closed just five days after one of its senior executives first contacted Chicago Bancorp Inc. about being acquired, Stephen Calk, chairman and chief executive officer of Chicago Bancorp told Both firms had planned to discuss the potential acquisition in a phone conference the day after Residential failed.

No one from Residential could be reached for comment..

"We were contacted by the chief financial officer of Residential Loan Centers on Feb. 10 and were asked if we would be interested in helping them out and acquiring the company and folding them in," Calk said. "I think we were one of the few companies to do that."

The conference call was originally scheduled for 4 p.m. on Feb. 10, but, at the last minute, Residential's CFO called and asked to have the call rescheduled for Feb. 16 -- which Calk agreed to.

But on Feb. 15, Calk said Residential's president, Matthew Rudnick, sent his employees an e-mail that said the company had ceased all operations because its credit line had been cut off.

Borrowers who had closed their loans on Friday the 13th were called on the following Monday by Chicago title and advised that their loans had not been funded, Calk explained.

"We immediately put bankers on those files to re-originate those loans and help out those folks who were left in a lurch and will be funding those loans," he said. "We've funded some already and will be funding others in the next week or two weeks."

Calk declined to reveal the number of loans that have been, or will be, funded. But he did say that 14-year-old Chicago Bancorp -- which has five branch offices in Illinois, Wisconsin, Florida, Texas and Arizona -- has already hired 12 former Residential loan officers.

"We're open to interviewing any qualified, licensed banker," Calk commented.

He foresees Chicago Bancorp, which had $890 million in originations in 2007, undertaking other rescue missions.

"There are a couple other companies that are struggling as well that we've also reached out to help them out or fold them or acquire them in some way, shape or form," he said without identifying any of them.

Residential, which originated loans in all 50 states, lost its line-of-credit with Countrywide -- a lender that apparently purchased a big share of its originations.

It is "always a mistake to have your credit line with one of the folks you sell the majority of your loans to," Calk stated. "But it's very tempting."

He added, "Countrywide came out with a program where they would not count equity needs against your line. That made it extremely attractive to get lines from them."

Other firms to recently be impaired by warehouse capacity include NetMore America Inc., which notified its third-party customers last week that demand had exceeded its lending capacity, and Realty Mortgage Corp., which suspended operations and filed for bankruptcy nearly two weeks ago after it lost a $200 million line-of-credit.

In recent congressional testimony, Mortgage Bankers Association President and Chief Executive Officer John A. Courson said, "For the originator that depends solely on warehouse lines-of-credit, this reduction could reduce liquidity, extinguish their lending business."

Residential, which had about 200 employees, operated offices in seven states -- including at least six in Illinois, according to data from various Web sites.

Calk said he had known and respected Residential and always thought it was well run. But he "was not a fan of the way they expanded."

The firm was founded in 1998. In 2001, it was ordered by the Illinois Office of Banks and Real Estate to cease and desist from mailing to customers of an un-named state-chartered bank refinance solicitation letters that did not identify Residential as the sender.

Jerry DeMuth is an award winning journalist who has been reporting for four decades.

e-mail Jerry at [email protected]
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