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Branch Operation Calls it Quits

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At its peak, Ace Holding Co. operated retail and wholesale subsidiaries that originated more than $3 billion in mortgages annually and employed hundreds of employees at dozens of offices. But following a string a lawsuits and the collapse of its wholesale subsidiary, the company has now shut down its retail branch operations.

Ace Mortgage Funding LLC, which operated as a retail branch operation, had been slowly closing its offices in recent months and then in one swift move closed the remainder last Thursday and Friday.

The total shutdown was completed only two days after the Indianapolis-based company had posted on Internet job search engines openings for a total of 21 loan officers in 19 offices from the West Coast to the East Coast.

Assistant vice presidents who managed branches at both ends of the country told that at least one branch was closed Thursday, with the remainder closed down on Friday.

“Ace closed all of its offices and shut down Friday,” one of the two said, estimating that as many as 21 offices may have been closed as part of the shutdown.

It was a quick end for the company that had once achieved quick success and even in recent months was still being praised, while also facing a court order to pay $4 million to loan officers who weren’t paid for overtime work.

Ace Mortgage was founded as a mortgage brokerage exactly 10 years ago by President and Chief Executive Officer Richard Hall and Executive Vice President Richard Gregory to specialize in debt consolidation refinances. Within four years, it became HUD- and VA-approved and expanded into conforming products and reverse mortgages as well as Alt-A and subprime loans.

In 2005, it also began acting as a mortgage banker and in 2006 announced that it was creating a wholesale division and hiring 150 people to staff it.

Ace Mortgage’s emphasis had been on telemarketing — using phone calls, TV ads and billboards. In 2002 when it opened a Nashville-area branch, assistant vice president and branch manager Andy Voyles said the office would have just 15 loan officers and five administrative personnel. But the company planned to have about 100 people in telemarketing positions.

Its total residential loan volume was $350 million in 2001, when it had only six offices in Indiana. In 2002 it began opening offices in other states, starting with Tennessee and Missouri.

In 2006, it originated more than $3 billion in residential mortgages in more than 40 states from 25 offices, according to a news release. At that time it was licensed in 45 states, a number that was about 35 when it shut down.

Last May it had 29 branches in 17 states, according to a company filing with the FHA.

Early in October, Ace’s Milwaukee office was honored by the Business Journal of Milwaukee with a shared first place award as that city’s top workplace. At that time, the company said it had more than 400 loan officers in more than 20 offices that were licensed in 31 states.

That was down from the approximately 500 it was reported as having when Fannie Mae, in August, presented the company with its Titanium Award as the preeminent user of its Desktop Originator technology.

But in recent years, troubles also have developed. Not only have originations plummeted — by almost half according to some reports — but it has had to fight class action lawsuits and state attorney general charges and watch a sister mortgage company shut down.

In January 2004, Ace Mortgage’s participation in the FHA mortgage insurance program was suspended for six months, then subsequently restored.

Then there were a growing number of lawsuits. The company has been a defendant or plaintiff in 27 complaints filed in federal courts since early 2005.

Twice — in July 2005 and December 2006 — Ace Mortgage was targeted with class action suits over its alleged failure to pay overtime to employees. A total of 374 loan officers joined the earlier lawsuit after it was certified as a nationwide class action with the inclusion of the later complaint.

On June 7, 2007, Ohio Attorney General Marc Dunn filed a complaint in Hamilton County Court of Common Pleas against Ace Mortgage’s Cincinnati office charging undue influence on an appraiser by requesting specific amounts for mortgages.

Under a settlement reach last May in U.S. District Court in Minnesota, Ace Mortgage and its two top officers were ordered to pay a gross settlement amount of $4.0 million for plaintiffs, plus $1.3 million for attorney fees and $0.1 million for litigation expenses and costs. But the claims of the Florida plaintiffs in the 2006 suit were dismissed without prejudice.

On Aug. 12, 2008, a suit was filed against Ace Mortgage and Countrywide Home Loans, alleging breach of fiduciary duty.

However, so far this year, five other suits filed against Ace Mortgage in federal courts were dismissed.

And in early October, a county prosecutor in Washington State acted against the company, getting it to give a promised $5,000 check to a woman after using Ace Mortgage to refinance her home.

Ace Mortgage’s parent, Ace Holding Co., acquired Vancouver, Wash.-based nonconforming and subprime lender Millennium Funding Group in November 2006. At the time of the acquisition, Millennium was a wholesale mortgage banker that was originating more than $3 billion in residential mortgages through 700 loan officers at 26 offices licensed in 42 states.

But in early March 2007, Millennium cut 76 employees, supposedly temporarily. Then in April laid off another 71 staff, leaving just 10 to close its remaining loans. A notice to brokers on April 30 indicated the unit was shutting down.

In fall 2004 Ace Mortgage was honored by Inc. magazine as one of the nation’s 500 fastest growing private companies, a list that also included such other now-defunct mortgage companies as Carteret Mortgage, Family First Mortgage and First Magnus Financial.

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