Former Delta Execs Launch New Firm

Reliance First Capital LLC is being created by the former top officials of Delta.

“We have essentially the same senior management team, same CEO, CFO, CCO, general counsel,” Reliance Chief Executive Officer Hugh Miller told MortgageDaily.com.

Miller was formerly the chairman, CEO and president of Delta, which at one time was among the top subprime lenders.

“We expect to focus more on FHA and other government type lending out of the gate,” explained Miller, who founded Delta in 1982.

But Reliance could expand into other types of mortgage products once it gets going, he suggested.

“We’ll certainly take a look at what other diversified product lines we want to offer depending on market conditions when the time comes,” said the 45-year-old Miller. “We’ll see where the markets are in six months or whenever we get off the ground and get licenses and get offices open and start running things. It’s still fairly tumultuous times so we really have to see where the markets are at.”

Thus, he explained, it makes sense to start small and “then go from there.”

Referring back to when he founded Delta, Miller pointed out that it has been 26 years since he had to plan a start-up mortgage company and thus he has “no specific timetable in place right now.”

Reliance has yet to apply for any state licenses, he admitted, and also has yet to decide in what states it will initially open offices and seek licensing, except that it will be “a small number of states.”

The new company currently has one office in Woodbury, on New York’s Long Island, the same city in which Delta was based. Although it’s in a different office building, it now has some office furniture, computers and other equipment that once belonged to Delta but was purchased through bankruptcy court, Miller said.

“Some of what we bought we’re using in our existing office,” he explained. “But most we have in storage for when we start up.”

Miller said he was “very interested” in hiring former Delta employees.

“We have a very loyal base of employees that have expressed a lot of interest in coming back,” he pointed out. “But in a start-up enterprise you don’t have room to take everybody back. You take back those that you think will make the most sense and obviously consider employment for other individuals that might not have been previous employees of Delta, depending on their skill sets and what we’re looking for at the time.”

On May 16, Reliance posted on the Career Builder and True Careers Web sites a job opening for a full-time account manager at an annual pay of $85,000 to $100,000.

“In this highly visible role,” the posting stated, “you will have an exciting opportunity to make a significant impact as you work closely, in a start-up enterprise, with a seasoned executive management team that has over 20 years of mortgage and consumer finance related experience located in Long Island, NY.”

The job’s responsibilities, it says, include preparing financial statements, working with external auditors and assisting with year-end partnership tax preparation.

Top officials at Reliance who held similar positions at Delta include Lee Miller, 39, as chief credit officer, and Marc E. Miller, 42, as senior vice president. The two are Hugh Miller’s brothers. Lee Miller, as an executive vice president of Reliance, attended the Mortgage Bankers Association’s National Secondary Market Conference, held in Boston May 4-7, according to MBA records.

Reliance, said CEO Miller, has teamed up with Greenwich, Connecticut-based Wexford Capital LLC, a 14-year-old investment advisor firm that manages a series of hedge and private equity funds and invests in bankrupt and distressed real estate and other companies. However, he declined to provide any information on how they will be working together, citing confidentiality agreements.

As the subprime meltdown began to unfold in early 2007, Delta Financial, formerly Delta Funding, appeared to sidestep the sector’s problems — reporting record first-quarter originations of $1.2 billion and nearly $5 million in profits.

At its annual shareholder meeting in May 2007, Delta attributed its success to the origination of mostly fixed-rate mortgages, its avoidance of riskier mortgage products and a balance between direct and broker origination channels as well as the retention of most of its originations.

But Delta’s fortunes began to turn by August, when rising loan loss provisions and a drop in revenues from loan sales slashed second quarter earnings by more than 80 percent. The company raised liquidity concerns and cut 20 percent of its workforce in August. By November, the company laid off even more employees and threw in the towel on December 17 when it announced plans to file bankruptcy after a deal for a $100 million capital infusion fell through.

“It pains me that Delta did not make it through this cycle,” Miller confessed to MortgageDaily.com, noting that Delta, in its 26-year history, had survived other downturns.

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

e-mail Jerry at demuth933@earthlink.net