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SouthStar Shuts Down

Wholesaler posts message on Web site

April 2, 2007

By MortgageDaily.com staff

Two years ago, SouthStar Funding touted Simple Score, a loan program for "borrowers with credit scores 540 and higher, on all property types up to $1 million and for up to 100 percent loan-to-value." The aggressive program helped it become one of the fastest growing private companies in the country.

Today, SouthStar is out of business.

"SouthStar Funding LLC sincerely regrets that it was necessary to cease its mortgage lending operations," read a message on its Web site today.

The Atlanta-based wholesaler, which said it was founded with 25 employees in 1998 by partners Kirk Smith, Brian Smith, Mike Fierman and Tyler Wood, reported more than $4 billion in production for 2004.

In 2005, the lender made the 24th annual Inc. 500 ranking with 329% year-over-year sales growth from 2001 to 2004.

"SouthStar is also a perennial list-maker of the fastest-growing privately-held companies in Atlanta," the company said.

But things started turning sour for the company last year.

SouthStar agreed to pay the U.S. Department of Housing and Urban Development $500,000 to resolve charges of alleged discrimination against African Americans and Hispanics.

SouthStar refused to make loans on Baltimore row houses valued under $100,000, HUD said. Because the lower-priced neighborhoods where row houses are located had a heavy concentration of African Americans and Hispanics, the practice allegedly led to discrimination.

Today, the company blamed the subprime market for its failure.

"The recent unprecedented downturn and policy changes in the mortgage industry necessitated this action," Monday's message said. "SouthStar appreciates its employees' and customers' loyalty to the company throughout the years."

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