After successfully emerging from bankruptcy earlier this year with fresh capital, ResMAE Mortgage Corp. has apparently become the latest victim of the subprime industry meltdown.
The southern California-based company, which earlier this year battled through a bankruptcy and layoffs, announced on its Web site it “is no longer accepting new mortgage loan applications.”
ResMAE was founded in early 2003 and specialized in originating and servicing subprime mortgages. Soon after, it considered going public, according to information from Milestone Advisers LLC, which arranged for $25 million in seed money for the company. At the time, the privately held considered was considering pursuing an Initial Public Offering and selling stock as a publicly traded company.
The Brea-headquartered company, once a top 20 subprime lender, has reportedly funded more than $16 billion since opening through February of 2007.
“We believe that ResMAE has one of the strongest management teams in the nonprime mortgage sector, a growth area that is typically less sensitive to interest rates than the larger prime mortgage sector,” Jim Brown, a venture capitalist that invested in the company, said in a statement at the time.
But by late 2006 — under pressure from rising delinquencies and falling home appreciation — the subprime industry began to collapse.
Discussions about a possible sale of the company to Credit Suisse were underway in early January as it was mired in a cash crunch after Merrill Lynch asked it to buy back about $300 million in loans. ResMAE couldn’t meet the call and attempted to reorganize by declaring bankruptcy.
Credit Suisse stepped in to buy most of ResMAE’s assets as part of the $19 million bankruptcy filing. At the time, ResMAE President and CEO Ed Resendez said the cash would save the company.
“Credit Suisse is providing us with post-petition warehouse financing and operating funds that we anticipate will enable us to operate in a normal manner during the reorganization.”
In early March Citadel Investment Group LLC pumped $22 million into the company through a deal to acquire certain assets and satisfy certain liabilities of the company.
With the infusion of cash, ResMAE was “well positioned to meet the challenges facing the industry head on and to become an industry leader in the years to come.”
Following the Citadel deal, ResMAE reported 198 California layoffs in May. The job cuts were posted on a state Web site. The company was required to report the job cuts under the federal Worker Adjustment and Retraining Notification, or WARN, act.
But by late September, as the secondary market had dried up for nonconforming mortgages, ResMAE laid off another 110 workers and shut down national operation centers in Dallas, California and Florida. The company said it was making the moves “in order to effectively compete and become an industry leader.”
Those plans, apparently, will not come to fruition.
While it would continue to service loans and honor outstanding commitments, new loan applications would no longer be accepted, according to the Web site notice. ResMAE called the move temporary, but messages left with management about more details were not returned to MortgageDaily.com.
According to the California Employment Department, ResMAE plans to cut 72 jobs on Nov. 18.